A Price-Scaled Supertrend as a Volatility-Free Trailing Stop

Summary

This document presents a simplified Supertrend whose distance from median price is set as a fraction of the current close, rather than as a multiple of average true range. The line trails in the active direction and changes direction when the close crosses the relevant line. Because the offset is price-scaled, the indicator does not narrow its distance during quiet periods simply because volatility has declined.

The author suggests it may suit some long-term charts spanning broad price ranges and describes the result as closer to a traditional trailing stop. The method has one adjustable factor, which the author says may reduce the opportunity for curve-fitting compared with a design using more parameters. No test results are supplied, and the example factor is not evidence of a generally suitable setting. The document recommends comparing it with the ATR-based version on each market using a simple trading system; performance will depend on the instrument and chosen parameters.

Key ideas

• The stop offset is a fraction of closing price rather than a multiple of ATR.
• The trailing line holds its level through sideways periods when average prices do not change.
• Price crossing the active line switches the indicator's direction.
• The single adjustable factor may limit parameter tuning, but the document provides no performance results.
• The author recommends testing it against ATR-based Supertrend for each market.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.