What is Supertrend on Thinkorswim?

There are several solutions to adding Supertrend on Thinkorswim, both free and paid.  There are free scripts on forums and on github, the script provider Patternsmart provide a paid version at regular price of $299 but on offer for $129 at the time of writing.

Let's take a look at these options, first the free versions:

Supertrend on Thinkorswim Free: usethinkscript

Dating back to December 2018 but with constant updates from users online right up to the time of writing this article on July 20th 2022, the well-respected forum user Mobius has created this Supertrend on Thinkorswim.

You can see the indicator in action here:

There is even a special mobile version which you can see here.

And also a helpful short 2-minute video on how to use it.

The creators and users claim that its advantages are:

• Has accurate signals in a trending market
• Less delay in signals compared to moving averages
  
• Is relatively simple to use as a buy or sell signal is shown when the indicator changes color.
  
• Works in realtime and does not repaint, but as below you should wait for the candle to complete
  

The disadvantages are:

•  Can have false signals in a range market
  
• The signal is ONLY accurate when the candle is complete
  
• Like many Thinkorswim scripts, Apple Mac users report problems, see also Bull Flag indicator on Thinkorswim
  
• You can use many inputs and defs but only one plot.
  

When setup correctly it should look something like this:

The prevailing wisdom is to use 5/15/30/60 minute timeframes over 5-10 days of charts.

Be careful and use the "thinkscript editor" and NOT "condition wizard" when adding the code. There are settings for turning off plot lines and bubbles that you can tick or untick, if this doesn't work the relevant lines of code can be removed by left clicking on the indicator and -> "Edit Sources".

Alerts can also be added using this code.

If you are experiencing lagging then you might want to adjust your memory settings, which you can read about here very soon.

Many user generated scripts can become stale but it is great to see the thread constantly updated, if you have any problems setting it up then the forum users might be able to help you.

Other interesting scripts related to this include this Yahoo Finance version. Here is another that combines Supertrend with Laguerre RSI. You can learn more about Laguerre RSI here.

Supertrend on Thinkorswim Free Script: github

If you want to go really old-school here is a post from February 2017 on github. And that's about all there is!  There aren't any comments on it, so you really would be better off going with the usethinkscript version above.

Supertrend on Thinkorswim Paid: Patternsmart

Patternsmart provide addons for Thinkorswim amongst other trading platforms. The advanced edition is a bit pricey at $299 but is on offer for a more reasonable $129 at the time of writing this article.

You can adjust settings such as:

Here is the indicator in action on a Forex market but it can be used for shares etc.

They also have a similar sounding product called Supertrend indicator, scan, screener bundle for the same price of $299 but also on offer for $129 at the time of writing.

How does Supertrend on Thinkorswim work?

The Supertrend indicator on Thinkorswim can give you a buy or sell signal in the trending market and can be used to determine whether a stock or an index is oversold or overbought.

It is designed to usemarket volatility. Like the name suggests, Supertrend is a trend-following indicator like moving averages. It is plotted on price, the mechanism is simple, and the data is constructed with the help of two parameters: multiplier and period.

The functions present in the Supertrend indicator for ThinkorSwim are capable of retrieving both fiscal and market data and provide numerous techniques. It automatically draws the most current trend line and can work on any instrument or timeframe.

What is interesting here is the Average True Range trailing stops are far more volatile than the stops based on moving averages. It is prone to change positions except when there is a strong trend.

In ThinkorSwim by TD Ameritrade the buy and sell signal changes as soon as the indicator flips over the closing price. It sticks to the original algorithm and implements other useful features at the same time.

How to Use the Supertrend Indicator on Thinkorswim

The Supertrend indicator can get market buy and sell signals and be used as a trailing stop to manage existing positions. It uses Average True Range (ATR) and median price to calculate the upper and lower trend line.

The indicator provides signals whenever there is a price breakout on the current trend line.

Utilizing Supertrend side by side with a stop loss is a good strategy to use in trading.

The indicator can work on all timeframes (minutes, daily, weekly, monthly) and all kinds of stocks (Futures, Stocks, Forex, ETF, etc.).

In constructing a Supertrend indicator strategy, often the default parameters are 10 for the Average True Range (ATR) and 3 for the multiplier. Any changes in these numbers can affect the use of the indicator. 

There is no best setting for any trading indicator but the more settings you change, it can lead to an over-optimized trading system.

The average true range (ATR) plays a major role in Supertrend as the indicator utilizes ATR to compute its value and signal the degree of price volatility. ATR is commonly used as a volatility indicator.

The true range indicator is the highest of these values (current highs minus current lows), the absolute value (intrinsic value) of the current high minus the previous close, and an absolute value of the current low minus the previous close.

To compute the Average True Range, you need to find the TR values first and divide them by the number of periods as represented by n.

It can be confusing, so let us simplify it using this formula. This is how it looks:

When the change of trend occurs, the indicator flips.

However, all you have to do is to check the Supertrend indicator and choose the values for periods and the multiplier.

The multiplier is the number by which ATR should be multiplied. Traders usually use ten periods and 3 for multipliers. Shorter values for n can bring more signals and more reactions to price changes.

If the values are longer, it can filter the noise of day-to-day price movements and fewer signals.

The buy signal is generated when the Supertrend closes below the price and the color changes to green. Meanwhile, the sell signal is seen when it closes above the price and it turns red.

There is no technical indicator that can be 100% accurate, including Supertrend. It can also generate false signals in the sideways market.

Conclusion

Like many addon indicators on Thinkorswim you have free and paid options. In this case the free option is probably best because it is so popular many users are modifying and refining the code to improve it right up to the present. 

For the paid version from Patternsmart you need to judge if the cost of $299 or possibly $129 on offer is too much for you.

If you want to have more efficient signals, then the accepted method is using Supertrend with other indicators like RSI or MACD to filter the signals while also plotting your own support and resistance lines. 

As always volume can be important and there are specialist Relative Volume Indicators for Thinkorswim.

You might be also interested in the RSI Divergence Indicator on Thinkorswim and What is Laguerre RSI?