Category Archives: Trend Following

Super Trend Indicator in EasyLanguage

SuperTrend Indicator – What Is It?

SuperTrend is a trading strategy and indicator all built into one entity.  There are a couple of versions floating around out there.  MultiCharts and Sierra Chart both have slightly different flavors of this combo approach.

Ratcheting Trailing Stop Paradigm

This indic/strat falls into this category of algorithm.  The indicator never moves away from your current position like a parabolic stop or chandelier exit.  I used the code that was disclosed on Futures.io or formerly known as BigMikesTrading blog.   This version differs from the original SuperTrend which used average true range.  I like Big Mike’s version so it will discussed here.

Big Mike’s Math

The math for this indicator utilizes volatility in the terms of the distance the market has travelled over the past N days.  This is determined by calculating the highest high of the last N days/bars and then subtracting the lowest low of last N days/bars.   Let’s call this the highLowRange.  The next calculation is an exponential moving average of the highLowRange.  This value will define the market volatility.   Exponential moving averages of the last strength days/bars highs and lows are then calculated and divided by two – giving a midpoint.  The volatility measure (multiplied my mult) is then added to this midpoint to calculate an upper band.  A lower band is formed by subtracting the volatility measure X mult from the midpoint.

Upper or Lower Channel?

If the closing price penetrates the upper channel and the close is also above the highest high of strength days/bars back (offset by one of course) then the trend will flip to UP.  When the trend is UP,  then the Lower Channel is plotted.  Once the trend flips to DN, the upper channel will be plotted.  If the trend is UP the lower channel will either rise with the market or stay put.  The same goes for a DN trend – hence the ratcheting.  Here is a graphic of the indicator on CL.

Super Trend by Bike Mike

If you plan on using an customized indicator in a strategy it is always best to build the calculations inside a function.  The function then can be used in either an indicator or a strategy.

Function Name: SuperTrend_BM

Function Type: Series – we will need to access prior variable values

SuperTrend_BM Function Code:

//SuperTrend from Big Mike now futures.io

inputs:
length(NumericSimple), mult(NumericSimple), strength(NumericSimple), STrend(NumericRef);

vars:
highLowRange(0),
xAvgRng(0),
xAvg(0),
dn(0),
up(0),
trend(1),
trendDN(False),
trendUP(False),
ST(0);

highLowRange = Highest(high, length) - Lowest(low, length);

xAvgRng = XAverage(highLowRange, length);

xAvg = (XAverage(high, Strength) + XAverage(low, Strength))/2;

up = xAvg + mult * xAvgRng;
dn = xAvg - mult * xAvgRng;

if c > up[1] and c > Highest(High, strength)[1] then
trend = 1
else
if c < dn[1] and c < Lowest(Low, Strength)[1] then
trend = -1;

//did trend flip?
trendDN = False;
trendUP = False;

if trend < 0 and trend[1] > 0 then
trendDN = True;
if trend > 0 and trend[1] < 0 then
trendUP = True;

//ratcheting mechanism
if trend > 0 then dn = maxList(dn,dn[1]);
if trend < 0 then up = minList(up,up[1]);

// if trend dir. changes then assign
// up and down appropriately
if trendUP then
up = xAvg + mult * xAvgRng;
if trendDN then
dn = xAvg - mult * xAvgRng;

if trend = 1 then
ST = dn
else
ST = up;

STrend = trend;

SuperTrend_BM = ST;
SuperTrend ala Big Mike

The Inputs to the Function

The original SuperTrend did include the Strength input.  This input is a Donchian like signal.  Not only does the price need to close above/below the upper/lower channel but also the close must be above/below the appropriate Donchian Channels to flip the trend,  Also notice we are using a numericRef as the type for STrend.  This is done because we need the function to return two values:  trend direction and the upper or lower channel value.  The appropriate channel value is assigned to the function name and STrend contains the Trend Direction.

A Function Driver in the Form of an Indicator

A function is a sub-program and must be called to be utilized.   Here is the indicator code that will plot the values of the function using: length(9), mult(1), strength(9).

// SuperTrend indicator
// March 25 2010
// Big Mike https://www.bigmiketrading.com
inputs:
length(9), mult(1), strength(9);

vars:
strend(0),
st(0);

st = SuperTrend_BM(length, mult,strength,strend);

if strend = 1 then Plot1(st,"SuperTrendUP");
if strend = -1 then Plot2(st,"SuperTrendDN");
Function Drive in the form of an Indicator

 

This should be a fun indicator to play with in the development of a trend following approach.   My version of Big Mike’s code is a little different as I wanted the variable names to be a little more descriptive.

Update Feb 28 2022

I forgot to mention that you will need to make sure your plot lines don’t automatically connect.

Plot Style Setting

Can You Do This with Just One Plot1?

An astute reader brought it to my attention that we could get away with a single plot and he was right.  The reason I initially used two plot was to enable the user to chose his/her own plot colors by using the Format dialog.

//if strend = 1 then Plot1(st,"SuperTrendUP");
//if strend = -1 then Plot2(st,"SuperTrendDN");

if strend = 1 then SetPlotColor(1,red);
if strend = -1 then SetPlotColor(1,green);

Plot1(st,"SuperTrend_BM");
Method to just use one Plot1

Another Good Year For Trend Following

Take a Look at the Last Two Years

Simple Donchian on a one contract basis.  $100 Commission/slippage.  Tested from 2000 thru December 31, 2021.  Do you see why most trend followers failed after the 2008 monstrous year.   Many funds caught the 2008 move and more funds were added soon thereafter.  Promises of similar performance came to fruition in 2011.  This kept much of the “new money” on the board.  However, reality set in and weak handed funds left for greener pastures.  Those that stuck it out were rewarded in 2014.  The trend drought of 2014 -2019 eroded most of the confidence in managed futures.  The rationalization that limited resources would eventually rise in price sounded good initially, but then fell on deaf ears after months of draw down.  Well known CTAs and hedge funds shut their doors forever.   The long awaited promise of 2008 came in the form of a pandemic – but it was too late.   Maybe now the deluge that ended the drought will persevere (hopefully not in the form of a pandemic) into the future.  Prices do not need to rise endlessly, but they need to move one direction or another without many hiccups.   

Simple Donchian Caught Most of the Commodities Up Moves

Which Sectors Pushed this Curve through the Roof

These reports were generated by my Python based Trading Simula-18 using Pinnacle continuous data – rollover triggered by date.  This is my new sector analysis report where I graph the last four years performance.  The tabular data is for the entire 21 year history.  The best sectors were energy, grains, financials and metals.  Lumber was extraordinary

Sector Analysis Report
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Currency -------------------------------------
BN -28012 44681
SN -26925 55337
AN 6560 34350
DX 16284 24387
FN 67463 31737
JN -22212 50362
CN -25355 44110
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Totals: -12198 141445
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Currency Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
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Energies -------------------------------------
ZU 180750 38330
ZH 155696 85541
ZN 70630 74400
ZB 131874 66651
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Totals: 538951 154434
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Energies Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
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Metals -------------------------------------
ZG -17070 43540
ZI 68395 146885
ZK 101888 29475
ZP 82885 27600
ZA 174955 83910
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Totals: 411052 166703
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Metals Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
################################################
Grains -------------------------------------
ZS 79175 20312
ZW -43438 51975
ZC 5238 26688
ZL 13248 24588
ZM 29860 28810
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Totals: 84083 88850
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Grains Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
################################################
Financials -------------------------------------
US 35991 24959
TY -350 29175
TU 1473 23969
EC 4700 9650
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Totals: 41813 56453
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Financials Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
################################################
Softs -------------------------------------
SB 25927 15035
KC -49775 94069
CC -72140 76660
CT 16785 45470
Lumber 218513 51745
JO 2588 15760
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Totals: 141898 128540
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Softs Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------
################################################
Meats -------------------------------------
ZT -29940 57680
ZZ 38480 15080
ZF 18413 57550
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Totals: 26952 66515
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Meats Last 4 Years ---------------------
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2018--------2019--------2020--------2021--------

How Do You Program this in Python

Here is the module for TS-18.  There is a little extra code to keep track of sectors in case you want to limit sector exposure.  However, this code takes every trade on a one contract basis.  This code reflects my latest version of TS-18, which will be released shortly.

#  Define Long, Short, ExitLong and ExitShort Levels - mind your indentations
buyLevel = highest(myHigh,40,curBar,1)
shortLevel = lowest(myLow,40,curBar,1)
longExit = lowest(myLow,20,curBar,1)
shortExit = highest(myHigh,20,curBar,1)
ATR = sAverage(myTrueRange,30,curBar,1)
stopAmt = 2000/myBPV

ATR = sAverage(myTrueRange,30,curBar,1)

posSize = 1
mmLxit = 99999999
mmSxit = -99999999
if mp == 1 : mmLxit = entryPrice[-1] - stopAmt
if mp ==-1 : mmSxit = entryPrice[-1] + stopAmt



# Long Exit
if mp == 1 and myLow[curBar] <= mmLxit and mmLxit > longExit and barsSinceEntry > 1:
price = min(myOpen[curBar],mmLxit)
tradeName = "LxitMM"
numShares = curShares
exitPosition(price, curShares, tradeName, sysMarkDict)
unPackDict(sysMarkDict)
# Long Exit
if mp == 1 and myLow[curBar] <= longExit and barsSinceEntry > 1:
price = min(myOpen[curBar],longExit)
tradeName = "Lxit"
numShares = curShares
exitPosition(price, curShares, tradeName, sysMarkDict)
unPackDict(sysMarkDict)
# Short Exit
if mp == -1 and myHigh[curBar] >= shortExit and barsSinceEntry > 1:
price = max(myOpen[curBar],shortExit)
tradeName = "Sxit"
numShares = curShares
exitPosition(price, curShares, tradeName, sysMarkDict)
unPackDict(sysMarkDict)
# Short Exit
if mp == -1 and myHigh[curBar] >= entryPrice[-1] + stopAmt and barsSinceEntry > 1:
price = max(myOpen[curBar],entryPrice[-1] + stopAmt)
tradeName = "SxitMM"
numShares = curShares
exitPosition(price, curShares, tradeName,sysMarkDict)
unPackDict(sysMarkDict)
# Long Entry
if myHigh[curBar] >= buyLevel and mp !=1:
price = max(myOpen[curBar],buyLevel)
tradeName = "Simple Buy"
numShares = posSize
enterLongPosition(price,numShares,tradeName,sysMarkDict)
unPackDict(sysMarkDict)
# Short Entry
if myLow[curBar] <= shortLevel and mp !=-1 :
price = min(myOpen[curBar],shortLevel)
if mp == 0 : sectorTradesTodayList[curSector] +=1
tradeName = "Simple Sell"
numShares = posSize
enterShortPosition(price, numShares, tradeName, sysMarkDict)
unPackDict(sysMarkDict)
Python within Trading Simula-18