Crypto Trading With SuperTrend Indicator - Steemit Crypto Academy - S5W7 - Homework Post for @kouba01
Hello All Steemians !!!
Today I'm going to make my Steemit Crypto Academy Homework task by professor @kouba01 that talking about Crypto Trading With SuperTrend Indicator. Very interesting lessons. Actually I have very little knowledge about this, but I will try to discuss it to improve my writing skills. On this occasion I will try to discuss it.
Show your understanding of the SuperTrend as a trading indicator and how it is calculated?
SuperTrend indicator is one indicator that traders can rely on to determine the current market trend based on cryptocurrency price movements and assist traders in analyzing price volatility in the market. The market trend is the most basic thing that a trader should analyze to find out whether the price is going up or down in a certain period of time. This indicator is very useful for identifying bullish or bearish trends so that traders can determine their next trading decisions and strategies.
The main factor and important point here is where the SuperTrend Indicator will determine the direction of the trend in the market and measure price volatility based on the average value of the candles formed on the trading chart or the ATR value. In this case, this indicator will give indications of support and resistance levels which are very influential factors in predicting the cryptocurrency market. This indicator helps traders to identify price movements in a bullish trend by providing an indication of support levels and in a bearish trend by providing an indication of resistance levels.
Supertrend indicator provides an indication of the current market trend with green and red color signals that are very identical in the cryptocurrency world. If the market is in a bullish trend, this indicator signals a green line and is below the candle. On the other hand, if the market is in a bearish trend, this indicator signals a red line and is above the candle. This indicator is very well applied in terms of technical analysis and executing trading strategies to make successful trades that bring in profits and eliminate losses.
How it is Calculated?
SuperTrend indicator can be calculated using the following formula:
Uptrend = (Higher + Lower) / 2 + factor x ATR (period)
Downtrend = (Higher + Lower) / 2 - factor x ATR (period)
In different cases, the ATR value has an important influence on the calculation. If the ATR value is higher then this indicates higher volatility and if the ATR value is lower then this indicates lower volatility. ATR value can be calculated by traders by analyzing several components as follows:
- The closing price of the last candle
- The high price of the current candle
- The bottom of the current candle
What are the main parameters of the Supertrend indicator and How to configure them and is it advisable to change its default settings?
Here I use the Tradingview platform to do technical analysis of cryptocurrency charts and use the SuperTrend indicator. On the main page I chose the Fx Indicator as I marked on the following chart.
On the next page, I fill in the SuperTrend and select the indicator as I marked it in the following chart.
On the main page, I can select Settings to configure the SuperTrend indicator as I marked in the following chart.
In the input feature, there are several parameters or components that can be configured by traders such as Timeframe, ATR Length and Factor. These parameters can be changed according to the needs of the trader's analysis and strategy. Traders can place 10 periods by a factor of 4 or 5.
Here I use the default parameter with a period of 10 and a factor of 3 where this parameter provides more rapid signals indicating a bullish and bearish trend in the market but may have a little more false signals and vice versa if I configure this indicator by increasing the value of a factor of 4 or 5 then this parameter will give less slow signals indicating bullish and bearish trend in the market. This all depends on the trading strategy that the trader has and will execute.
Based on the chart above, the Supertrend Indicator using a period of 10 and a factor of 3 shows 2 false short signals and 1 false long signal. This indicates that the signal is faster on the chart.
Based on the chart above, the Supertrend Indicator using a period of 10 and a factor of 4 shows a change which has eliminated two false short signals and left 1 false long signal. This indicates that the signal is slower on the chart and may give more accurate results.
Based on the chart above, the Supertrend Indicator using a period of 10 and a factor of 5 shows a significant change where all false signals have been removed. This indicates that the signal is slower on the chart and gives more accurate results.
In my opinion, every trader can configure parameters and make changes that provide different results. The use of parameters 10-3 will be more suitable for traders who carry out a trading with a short timeframe because the indicator provides more quick signals to price movements. Conversely the use of 10-4 or 10-5 parameters will be more suitable for traders who carry out a trading with a long timeframe because the indicator provides slow signals to price movements. Back again, the parameter settings on the Supertrend indicator depend on technical analysis and trading strategy that will be carried out by the trader.
Based on the use of the SuperTend indicator, how can one predict whether the trend will be bullish or bearish
SuperTrend indicator can help traders to identify bullish or bearish market trends based on price movements that rise or down within a certain period of time. This indicator provides an indication of a green or red line that is above or below the candles on the chart.
The market that is in a bullish trend can be identified by traders by analyzing green lines and is below the candles formed on the chart based on price movements. In this case, the price movement must have the upward direction and show price increases in the current trend. The use of this indicator can be reliable traders to determine the current market trend so traders can place buy orders based on bullish trends that has occurred in the market.
Based on the chart above, the SAND/USDT market shows a bullish trend based on a green line and is below the candles formed on the chart. Here the price movement has the upward direction and shows a price increase within a certain period. The green line that is below the candle also acts as a support level. Based on this, the SuperTrend indicator can be used to predict a bullish trend in the market.
The market that is in a bearish trend can be identified by traders by analyzing red lines and is above the candles formed on the chart based on price movements. In this case, the price movement must have the downward direction and show price decreases in the current trend. The use of this indicator can be reliable traders to determine the current market trend so traders can place sell orders based on bearish trends that has occurred in the market.
Based on the chart above, the SAND/USDT market shows a bearish trend based on a red line and is above the candles formed on the chart. Here the price movement has the downward direction and shows a price decrease within a certain period. The red line that is above the candle also acts as a resistance level. Based on this, the SuperTrend indicator can be used to predict a bearish trend in the market.
Explain how the SuperTrend indicator is also used to understand sell / buy signals, by analyzing its different movements
SuperTrend indicators provide buy and sell signals to traders based on color lines formed on the chart that follow the price movement. This indicator not only provides an indication of entry positions in the market, this indicator also provides an indication of the exit position in the market. This can be done by traders when the market is in the end of the current trend and shows a reversal of other trends. This indicator helps traders to place buy or sell orders at the right time so they are able to maximize profits and minimize losses on the execution of trades made.
In this case, important points for identifying buy and sell signals on the SuperTrend indicator are green lines and red lines on the chart. Buy signals can be identified when the market shows a bullish tren and has a green line that is below the candles. Sell signals can be identified when the market shows a bearish trend and has a red line that is above the candles. Simply put, buy and sell signals can be determined when the market experiencing trend changes and confirmed by line changes from green to red or from red to green. The bullish trend can experience a reversal of trends to bearish based on price movements over time and vice versa.
Based on the chart above, the XMR / USDT market shows several buy and sell signals on a bullish and bearish trend. Buy signals can be identified when the chart shows a green line that is below the candles where this line changes from red to green and this shows the beginning of the bullish trend. Instead, sell signal can be identified when the chart shows a red line that is above the candles where this line changes from green to red and this shows the beginning of a bearish trend. This occurs based on price movements that go up or down and experience a bullish or bearish trend within a certain period of time.
How can we determine breakout points using Supertrend and Donchian Channel indicators? Explain this based on a clear examples
SuperTrend indicator can be combined with the Donchian Channel indicator in terms of technical analysis and executing trading strategies. It aims to improve the accuracy of the analysis by determining the breakout point in the market. Donchian Channel indicator gives an indication regarding price volatility where it has 3 lines that move based on price movements so that buy and sell signals can be determined after a breakout occurs. The breakout point is an important factor that traders should consider before executing a trade as it is a good confirmation indicating the market is about to experience a strong bullish or bearish trend and the trader can place a buy or sell entry at the beginning of the trend.
In this case, buy entry signals can be identified and confirmed when the rising price movement breaks the upper line of the Donchian Channel and must be 2 consecutive bullish candles which indicates the beginning of a strong bullish trend. On the other hand, sell entry signals can be identified and confirmed when the descending price movement breaks the lower line of the Donchian Channel and must be 2 consecutive bearish candles which indicates the beginning of a strong bearish trend. Traders can place buy and sell entries after the SuperTrend indicator shows the current market trend and the Donchian Channel indicator confirms the breakout point in the market.
Based on the chart above, the XMR/USDT market shows an upward price movement in the market. SuperTrend indicator indicates a bullish trend with a green line below the candles. Donchain Channel indicator confirms the breakout point when the ascending price movement breaks the upper line and has 2 consecutive bullish candles. Traders can place a buy entry on the next candle because the buy entry signal has been identified and confirmed using a combination of these two indicators.
Based on the chart above, the XMR/USDT market shows a downward price movement in the market. SuperTrend indicator indicates a bearish trend with a red line above the candles. Donchain Channel indicator confirms the breakout point when the descending price movement breaks the lower line and has 2 consecutive bearish candles. Traders can place a sell entry on the next candle because the sell entry signal has been identified and confirmed using a combination of these two indicators.
Do you see the effectiveness of combining two SuperTrend indicators (fast and slow) in crypto trading? Explain this based on a clear example
Two SuperTrend Indicators can be combined with different settings to produce more effective and accurate technical analysis. The two-indicator SuperTrend strategy can be carried out by traders using the slow parameter with the default setting of 10-3 and by using the fast parameter with the setting of 21-2. In this case, the trader can identify a buy signal when the green line with fast parameters crosses the green line with slow parameters in a bullish trend and sell signals when the red line with fast parameters crosses a red line with slow parameters in a bearish trend.
In my opinion, the combination of two SuperTrend indicators with fast and slow parameter settings is a good innovation and one of the strategies that can increase effectiveness and accuracy before executing a trade. It aims to provide traders with two identifications and confirmations that can be used as a reference in showing buy or sell signals in the market. In addition to combining with other indicators, this is a good initiative and can be a solution for producing successful technical analysis.
Based on the chart above, the DASH/USDT market is showing a bullish trend with a green line below the candles on the chart. The combination of the two SuperTrend indicators shows the green line with fast parameters several times crossing below the green line with slow parameters. This is the meeting point of the two indicator lines that indicate and confirm a buy signal for traders because the price movement will increase.
Based on the chart above, the DASH/USDT market is showing a bearish trend with a red line above the candles on the chart. The combination of the two SuperTrend indicators shows the red line with fast parameters several times crossing above the red line with slow parameters. This is the meeting point of the two indicator lines that indicate and confirm a sell signal for traders because the price movement will decrease.
Is there a need to pair another indicator to make this indicator work better as a filter and help get rid of false signals? Use a graphic to support your answer
In the world of cryptocurrencies, the use of indicators in conducting technical analysis does not have 100% correct accuracy in giving signals to traders. Sometimes indicators give false signals to traders due to several factors that can affect the cryptocurrency market. This also includes the SuperTrend indicator where this indicator can be combined with other appropriate indicators such as the RSI to make analysis results better, more accurate, effective, efficient and able to eliminate false signals.
Relative Strength Index (RSI) indicator is one of the good indicators that traders often use in analyzing cryptocurrency trading charts. It is a momentum indicator that shows overbought and oversold moments occurring in the market based on price movements. The combination of the SuperTrend and RSI indicators is able to eliminate false signals that may occur. This can be proven by the RSI indicator which gives a signal and the SuperTrend indicator which confirms the signal. When the RSI indicator shows an overbought or oversold moment then this is a buy or sell signal and then the SuperTrend indicator will confirm a bullish or bearish trend reversal according to the next price movement.
Based on the chart above, the DOT/USDT market showed a downward price movement and the RSI indicator showed an oversold. Over time, the price movement shows an increase and the SuperTrend indicator shows a bullish trend with a green line below the candles. Here the RSI indicator gives a trend reversal signal and the SuperTrend indicator confirms a trend reversal from bearish to bullish. This is a buy signal that can be identified and confirmed by traders where oversold and a bullish trend are signals and confirmations to place a buy entry in the market.
Based on the chart above, the DOT/USDT market showed an upward price movement and the RSI indicator showed an overbought. Over time, the price movement shows a decrease and the SuperTrend indicator shows a bearish trend with a red line above the candles. Here the RSI indicator gives a trend reversal signal and the SuperTrend indicator confirms a trend reversal from bullish to bearish. This is a sell signal that can be identified and confirmed by traders where overboughtand a bearish trend are signals and confirmations to place a sell entry in the market.
List the advantages and disadvantages of the Supertrend indicator
Advantages
SuperTrend indicator helps traders analyze bullish or bearish market trends with signals that are easy for every trader to understand.
SuperTrend indicator helps traders determine and provide buy and sell entry signals that can maximize profits and minimize losses.
SuperTrend indicator helps traders analyze price volatility and trend reversals based on price movements and green or red color lines.
Disadvantages
SuperTrend indicator has a bad signal when the price movement is moving in a range.
SuperTrend indicator may give false signals without using in combination with other indicators or with fast and slow parameters.
SuperTrend indicator is only suitable for use on a strong bullish or bearish trend and is not suitable for use on a sideway trend.
Conclusion
SuperTrend indicator is a technical indicator that traders can use to analyze the direction of market trends and price volatility in the market. This indicator can be configured with a period of 10-3, 10-4 or 10-5 by the trader according to the needs of the analysis and trading strategy to be carried out. A bullish trend and a buy signal can be identified and confirmed when the indicator shows a green line that is below the candles. On the other hand, bearish trends and sell signals can be identified and confirmed when the indicator shows a red line that is above the candles.
SuperTrend indicator can be combined with the Donchian Channel indicator to determine the breakout point where the price movement must break the upper or lower line and have 2 consecutive candles. Setting this indicators with fast and slow parameters where the two lines will cross can also be done to increase effectiveness. The use of the RSI indicator where the overbought or oversold moment is a signal and the SuperTrend indicator is a confirmation can eliminated false signals. All of this aims to provide good buy or sell signals so that trading will run successfully.