Supertrend Using Directional ATR and Ratcheting Stop Distances

Summary

This Supertrend variant calculates separate true-range averages from rising and falling candles. In an uptrend, it uses the average from falling candles to set the long-side stop distance; in a downtrend, it uses rising-candle volatility for the short-side distance. The rationale is that adverse candles are more relevant to protective stops than candles moving with the position. While a trend is active, the stop distance can shrink as volatility falls but is prevented from widening when the relevant directional ATR increases.

The indicator offers several moving-average methods, an ATR multiplier, and options to wait for candle closes or make stop updates sticky. Its description illustrates the intended behavior on USDTRY and says the adjustment can reduce stop distance and prompt earlier exits in strong trends. It provides no quantitative performance comparison, so the proposed benefit is conceptual and visual rather than established by reported backtests. Alerts mark direction changes, and the direction value is available for use by other indicators.

Key ideas

• Separate true-range averages are maintained for rising and falling candles.
• Long-side stops use volatility from falling candles, while short-side stops use volatility from rising candles.
• During a position, the relevant ATR-based stop distance can decrease but does not expand with rising volatility.
• Close confirmation and sticky behavior are optional controls for direction changes and stop updates.
• The page offers a chart illustration but no quantified evidence of performance improvement.

Tags

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