Building an ATR-Based SuperTrend Breakout System
Summary
The article explains how to translate a SuperTrend indicator into a rule-based trading system. It first derives true range from the current high and low and the previous close, then smooths true range into ATR. The midpoint of each bar, adjusted by a configurable ATR multiple, defines upper and lower bands. Recursive band updates narrow the active boundary during a trend, while a close crossing the prior boundary changes the direction flag. The selected band becomes the plotted trend line, and direction changes generate long or short signals.
The author describes a 15-minute implementation using quarterly futures and reports a one-year backtest with specified indicator settings and order size, including an annualized return of about 33%. A sharp market decline is identified as a major detractor, and the author speculates performance would have been better without it. The article does not provide enough detail to assess fees, slippage, robustness across markets, or parameter sensitivity. Its code discussion also focuses on an alert and example order flow, so the reported result should not be treated as evidence of live profitability.
Key ideas
- SuperTrend uses ATR-adjusted bands around the bar midpoint to define a trend-following breakout signal.
- True range incorporates the previous close, and ATR is calculated with a smoothed moving average.
- Recursive band updates maintain the active trend boundary until price crosses it and reverses the direction state.
- The article reports a one-year 15-minute futures backtest, but provides limited evidence about costs and robustness.
- A large market decline materially affected the reported system results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.