Using Super-Trend (14-2) to find Buying/Selling opportunities in Stock Market.
Super-Trend (ST) is one of the most popular overlay indicators that is based on the premise of moving averages. It is plotted against the price action of the respective security, as to which it offers the precise knowledge of the ongoing trend. ST can also be used to devise an effective entry-exit strategy and it also offers excellent support and resistance levels.
The ST comprises of two variables, namely “Period” and “Multiplier”. The most commonly accepted parameter for day trading are Period=10 and Multiplier=3. However, the biggest drawback with this setting is that its reaction is very laid-back and the stop-loss (SL) is a little too big, thus tipping off the ideal risk-reward ratio. On the contrary, a parameter setting of Period=14 and Multiplier=2 efficiently overcomes the aforementioned pitfalls.
Following is the intraday cart (15 minutes) of CNX Nifty Index:-
Here, the black line represents ST (10-3) and the blue line represents ST (14-2) respectively. It is quite evident from the aforementioned chart that the ST (14-2) has been far more reactive at a number of occasions, thereby giving early crossovers (positive & negative) in comparison to ST (10-3). This is very important from a trader’s point-of-view as many-a-times marginal rallies of 10-20 points often go undetected in ST (10-3), whereas it gets rightly captures under ST (14-2) and on days when there is a sideways action in Nifty, these 10-20 points may mark the difference between a profitable trade and a loss making trade. In addition to this, the level of SL that is provided by ST (14-2) is comparatively smaller and far more appropriate than ST (10-3), thereby ensuring a risk-reward ratio that is a favor of the investor at all times.
However, it may very difficult for any investor to identify such effective ST (14-2) crossovers, manually, that occur on multiple scripts at the same point of time. The following query may be used be used by the traders on the technical analysis software offered by traderguide.in:
This query scans through a number of scripts and offers the list of only those scripts under which a crossover of ST (14-2) is be observed at the given point in time. The trader is required to select the query [ST (14-2)], define the time interval (eg.-15 minutes) and select the index on which this query is to be run (eg.-Nifty 50).
Following is the snapshot of the Query-Builder tool of traderguide.in under which this condition may be executed:-
The trader may copy & past the aforementioned query in the text box provided under query builder and select the desired time frame and index on which he/she wishes to run the query. The results will appear instantaneously in the box given just below that. Also, one does not need to refresh the system again-and-again as the Query Builder has an auto refresh feature that will allow the trader to keep a live track of all the scripts on which the ST (14-2) crossover is occurring. This query can also be saved as a part of the default settings in the account of the trader using the software provided by traderguide.in.
- Anand Singh Gaur
- Sunil Kothari