In previous newsletters, we have extensively covered Point and Figure charts, including their construction, box sizes, and swing trading applications. In today’s newsletter, we will focus on building a simple strategy using just two box sizes and the Super Trend indicator. This strategy is based on the concept of Multi-Timeframe Analysis and is ideal for traders who prefer a method that does not require constant screen monitoring.

Super Trend as a trend indicator

Super Trend is an objective trend indicator that incorporates ATR, range, and a constant, making it a reliable tool for trend analysis while accounting for volatility. Unlike Moving Averages, it remains flat during sideways movement, reducing false signals. When using multiple timeframes, the larger box size is ideal for trend identification, while the smaller one aids in entry and exit. Setting Super Trend on a higher timeframe helps capture trends effectively, as it rises or falls with price movements but stays stable during volatility.

Building a strategy with PnF charts and Super Trend

Let us now build a simple strategy with only two elements: Super Trend (default setting of 10 period and 3 as multiplier) and PnF charts on two box sizes: 1% (Daily) and 0.25% (Daily).

The rules for bullish trades are:

1. 1% (Daily) chart: Price should be above the Super Trend.

2. 0.25% (Daily) chart:

   • Entry: First Double-Top Buy (DTB) after Super Trend turns bullish.

   • Initial Stop loss: The next Double-Bottom Sell to the Buy trigger.

   • Trailing Stop loss: Super Trend indicator.

The rules for bearish trades are:

1. 1% (Daily) chart: Price should be below the Super Trend.

2. 0.25% (Daily) chart:

   • Entry: First Double-Bottom Sell (DBS) after Super Trend turns bearish.

   • Initial Stop loss: The next Double-Top Buy of the Sell trigger.

   • Trailing Stop loss: Super Trend indicator.

If the initial stop loss is triggered but the price remains above the Super Trend, a re-entry can be considered at the next Double-Top Buy or Double-Bottom Sell signal.

For bullish trades, the stock should be relatively outperforming the Nifty 50, while for bearish trades, it should be relatively underperforming the index.

Examples

The chart of ACE on the 1% and 0.25% Daily TF shows that the stock remained above the Super Trend from August 22, 2022. On the 0.25% chart, the first Double-Top Buy (DTB) could have served as an entry point for a swing or positional trade. Over a two-year period, a trader would have had only five trade opportunities.

Observe the chart below of MAZDOCK. On 1% chart, the price was above the Super Trend from 23rd May 2023 till 19th Sept 2024. At the same time, the price gave 6 entries on 0.25% chart.

Having the stop loss on 0.25% makes sure that the entry is affordable, and the exit is quick as well.

The chart of BLS shows that on the 1% timeframe, the price remained above the Super Trend from April 1, 2022, to February 27, 2023. During this period, only one entry was triggered on the 0.25% chart, and the trade remained valid until the Super Trend on the 1% chart turned bearish. Notably, the stop loss was hit first on the 0.25% chart, and no further entries were given before the broader trend reversed. Later, the Super Trend turned bullish again from June 13, 2023, to March 13, 2024, during which two entries were triggered on the 0.25% chart.

Successful trading strategies are built on simplicity. Once a trader masters the fundamentals, creating effective, easy-to-execute strategies becomes a structured process of understanding indicators, their purpose, and how to interpret them for an edge in the market. If you want to develop such strategies and refine your trading system, TNT One is your gateway to in-depth learning. With TNT One, you gain access to all current and future courses, exclusive webinars, and weekly sessions on The Noiseless Trader platform. Elevate your trading skills—click on the poster below to explore TNT One today.