Captures sustained directional trends using ATR-based indicator
| Strategy Type | Trend Following with Dynamic Trailing Stop |
| Market Outlook | Captures sustained directional trends using ATR-based indicator |
| Risk Profile | Low to Moderate - Built-in trailing stop mechanism |
| Reward Profile | 1:2 to 1:5 on trending moves; Captures 60-80% of major trends |
| Time Horizon | Swing trading (5-20 days) to Positional (1-3 months) |
| Capital Requirement | A$10,000 - A$50,000 for meaningful exposure |
| Margin Type | Cash/CHESS-sponsored for shares; margin posted to ASX Clear for LEPOs and written ETOs |
| Best Used When | BHP in clear trending phase; Avoid during choppy/sideways markets |
| Asx Applicability | BHP ideal for Supertrend due to clean trending behaviour driven by commodity cycles and global institutional flows; resources bellwether with predictable volatility; highest liquidity on the ASX ensures reliable indicator signals |
| Asic Compliance | Compliant standard technical analysis strategy; operated as an educational simulation only and not a financial product or financial advice under the Corporations Act / AFSL regime |
| Lot Sizes | 100 shares per contract (~A$4,200 notional) • 100 shares per contract • No lot restriction; minimum marketable parcel A$500 for a new holding |
| Trading Hours | 10:00 AM - 4:00 PM AEST/AEDT (Sydney); closing single-price auction ~4:10 PM sets the official daily close; Supertrend signals on daily close |
| Expiry Considerations | Monthly ETO expiry (Thursday before the last Friday of the month); roll 5-7 days before for positional derivatives |
| Tax Implications | Investor (CGT): held >12 months = 50% CGT discount, held <12 months = full gain at marginal rate; classified share traders: gains taxed as ordinary income with losses deductible; ETOs/LEPOs typically on revenue account; ATO 'badges of trade' determine trader vs investor status |
These are widely-tested default settings. Period 10 captures recent volatility well. Multiplier 3.0 balances between staying in trends and protecting from reversals. They work well for most stocks including BHP.
Wait for daily CLOSE to confirm the flip. Intraday crosses often reverse by close. Enter at next day's open after confirmed flip or on pullback for better entry.
Whipsaws are part of the strategy. Accept small losses (Supertrend limits them). Ensure winners are larger than losers. Don't revenge trade - wait for next clean signal.
Hold until opposite color flip. This could be days, weeks, or months depending on trend. Don't exit on minor pullbacks - trust the trailing stop mechanism.
Yes, but use tighter settings (Period 10, Multiplier 2.0) on hourly charts. Intraday Supertrend has more signals and whipsaws. Daily timeframe is more reliable.
Use Weekly Supertrend for major trend direction. Only take Daily signals aligned with Weekly. Use Hourly for entry optimization. Weekly green + Daily green flip = highest confidence.
ADX > 25 confirms trend strength. RSI > 50 and rising confirms bullish momentum. Price above 50 EMA confirms trend context. Volume > 1.2x average confirms conviction.
Wait for established trend (Supertrend green 5+ days). When price pulls back within 1-2% of Supertrend line and bounces (reversal candle), enter with stop just below the line.
Skip when: ADX < 20, more than 2-3 flips in 20 days, weekly and daily conflict, or 7 days before results. These conditions produce unreliable signals.
Strong trend (ADX > 30): Use standard or wider multiplier (3.5). Moderate trend (ADX 20-30): Standard settings (10/3.0). Weak trend (ADX < 20): Skip or use tighter settings cautiously.
Test Period 5-20 and Multiplier 1.5-4.0 with 70/30 in-sample/out-of-sample split. Accept < 20% degradation. Standard 10/3.0 is usually robust. Test across multiple resources stocks.
Use Fast ST (7/2.0) + Slow ST (14/3.5). Enter when both align. Exit on Fast flip (early warning). Re-enter if Slow holds. Reduces whipsaws while catching reversals early.
ITM ETO calls (delta 0.75+) for trend following. Bull call spreads for defined risk. LEPOs for weekly signals (deep-ITM, negligible time decay). Exit options on opposite Supertrend flip.
Track: Win rate (45-55%), Win/Loss ratio (2-3x), Profit Factor (>1.5), Sharpe (>1.0), Max DD (<15%). Compare to BHP buy-hold. Monthly review, quarterly optimization.
Cap BHP at 20% of portfolio. Total resources Supertrend max 25%. Monitor BHP-RIO correlation - don't hold both at full size. Track total directional exposure.
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