SuperTrend Oscillator

This versatile oscillator, built with three components derived from the SuperTrend indicator, is your go-to tool for determining market conditions like overbought or oversold zones. It aids traders in identifying retracements, discerning if the market is ranging or trending, and predicting potential price interactions with the SuperTrend. Moreover, it provides insights into the reliability of SuperTrend signals by showing false signals and their percentage.

Customizable Settings

• Length: Defines the period for the "average true range" used in SuperTrend calculations.
• Mult: Adjusts the multiplicative factor of the "average true range."
• Smooth: Sets the smoothing level of the histogram for clarity.

Additional Features:

• Fixed Transparency: Keep the main oscillator’s transparency constant.
• Show Lines and Labels: Toggles the visibility of the indicator's lines and labels.

How to Trade with This Oscillator

Designed to operate within a range of (-100, 100), values nearing 100 or -100 suggest a strong trend. If the main oscillator reads above 0, the price is above the SuperTrend.

Identify retracements in trending markets when the oscillator falls within 50 and -50. Overbought or oversold levels highlight potential exit points, helping traders to optimize their trades.

The indicator also features two supplementary oscillators: a smoothed version of the main oscillator (Signal) and a smoothed version of the Main to Signal oscillator difference (Histogram), making it akin to a MACD. Traders can use the histogram to speculate potential price crosses with the SuperTrend by noting the sign differences between the main and histogram oscillators. This helps in filtering out potential false signals for more accurate trading decisions.

When price and SuperTrend do not align in histogram and main oscillator signs (e.g., main = 1, histogram = -1), crossovers can be disregarded. The indicator further provides symbols indicating false or true SuperTrend signals, assisting in signal validation.

Symbols like a cross or checkmark are displayed at the top (for buy signals) or bottom (for sell signals) based on the validity of previous signals. The indicator also displays the percentage of false signals over the chart’s history.

Technical Details

This oscillator uses a scaling similar to max-min normalization. It processes the price and SuperTrend difference, divided by the maximum gap between the upper and lower extremities of the SuperTrend. The oscillator adjusts for values higher than (1,-1) with max and min functions when price crosses the SuperTrend.

The Signal line is computed through exponential averaging with an adaptive filter, where the smoothing factor is the main oscillator's squared value over length. This ensures minimal distortion in trending markets, aligning closer with the main oscillator.

FAQ

How can I access this trading indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What does a main oscillator value above 0 indicate? It means that the price is positioned above the SuperTrend, signaling a potential bullish trend.

How can this indicator help filter false signals? By comparing the sign between the main oscillator and the histogram, traders can filter out false signals effectively, thus improving trading performance.