Supertrend on Nifty 50: 20 years tested, after charges and tax

Supertrend is probably the most popular indicator among Indian traders. Videos call it a 90% win-rate strategy, and Telegram channels sell signals built on it. We wanted to know what it would have left in a real account, trading the Nifty 50 for 20 years and paying charges, slippage and tax.

Supertrend was one of the first indicators I played with. It was everywhere online when I started trading, and it looked great on a chart, green under the price all the way up and red above it all the way down. It looked like the indicator that was going to make me rich. It didn't, and I gave up on it quickly. This test shows why.

None of the 56 settings we tested beat holding a Nifty 50 ETF once tax was paid. The usual setting kept 9.2% a year against 11.2% for buy and hold. What Supertrend did do was cut the worst fall from 60% to about 34%. A plain mix of 59% Nifty and 41% liquid fund, with no timing at all, came within 0.1% a year of it.

All figures here are hypothetical backtest results, not a recommendation. Past results do not predict future ones.

The rules we tested

Supertrend draws a line below the price in an uptrend and above it in a downtrend. The gap between the line and the price is a multiple of the average true range, or ATR. A close through the line flips the trend. The usual setting is a 10-day ATR and a multiplier of 3.

Buy a Nifty 50 ETF when Supertrend turns up on a daily close. Sell when it turns down. While out, hold a liquid fund.

We used TradingView's formula, with Wilder's ATR and bands that move only in the trend's direction, and checked our version against it bar by bar.

How we tested it

• We used daily Nifty 50 index prices from January 2006 to 9 October 2026, 20.8 years. The test covers 2008, 2020 and the long sideways years in between. An index has no survivorship bias, because its value on each day comes from the stocks that were in it that day.
• The account starts with ₹10 lakh. It is fully invested when the trend is up and fully in cash when it is down.
• Every trade fills at the close of the signal day, as if you placed the order near 3:25 pm, with 0.1% slippage on every buy and sell.
• While invested, the ETF earns a 1.3% dividend yield, less its 0.04% expense ratio. While out, cash earns 6% a year, taxed at 30% as a liquid fund's gains are.
• Every trade pays Zerodha's current charges for ETF delivery. There is no brokerage, but there are exchange charges, stamp duty, GST and the DP charge.
• Tax follows today's rules for the whole period. A gain held under a year is short-term and taxed at 20%. A longer hold is long-term and taxed at 12.5% above ₹1.25 lakh a year. We set off losses and carried them forward as the rules allow.
• A long-short version trades the same signals with Nifty futures, without leverage. It pays futures STT of 0.05% on the sell side, the rate since April 2026. It rolls over every month and pays 30% tax on profits as business income.

The usual setting, layer by layer

It traded about 4 times a year. It won 52% of its trades, with an average win of 8% against an average loss of 3%. It was invested 59% of the time.

Tax costs more than charges. Charges and slippage took about 1% a year. Tax took 2.7%. None of its 83 trades lasted a year, and the median lasted 41 days, so every gain is short-term and taxed at 20% that year. Buy and hold pays 12.5% once, at the end, and the tax money keeps compounding until then. Our capital gains calculator shows the difference on your own trades.

Most of the "edge" before tax is the liquid fund. Without dividends and the cash yield, Supertrend made 9.4% against 10.5% for the price index. It looks better than buy and hold before tax only because its idle money earned 6%.

The fair comparison is holding less. Supertrend sits out 41% of the time, so the fair benchmark is an account that is 59% invested all the time. That account kept 9.1% after tax with a worst fall of 39%. Twenty years of timing added about 0.1% a year and five points less drawdown.

Good years and bad years

Before tax, after charges.

Supertrend protects you in long falls. In 2008 it was out of the market for most of the fall. It loses in choppy years, when it sells after a drop and buys back higher. In 2024 the index gained 10% and Supertrend lost 8%. It also misses the first months of every recovery, because it waits for the trend to turn.

If a 60% fall would make you sell everything at the bottom, a strategy that limits the fall to about a third may keep you invested. A fixed split between equity and debt gave almost the same protection with no trading.

Every setting we tried

The table shows what each setting kept per year after charges and tax, long only. Buy and hold kept 11.2%.

Tight settings are the worst. A multiplier of 1 flips 16 times a year, and every flip costs slippage, charges and short-term tax. The 10 × 1 setting kept 4.8% a year, less than the liquid fund on its own.

The best cell is probably luck. 14 × 3 is the top of the table at 9.8%, but its neighbours range from 6.7% to 9.4%. The worst fall varies just as much, 34% at 10 × 3 and 50% at 10 × 2.5. A setting that only works at one exact value is fitted to the past. Our backtest checklist has more on spotting this.

The long-short version is worse

Signal sellers often run Supertrend as stop-and-reverse, long when it turns up and short futures when it turns down. On the Nifty 50 that kept 5.6% a year after tax at 10 × 3, with a 40% worst fall. The best setting reached 6.7%. The shorts lose money in a market that rose eight-fold over the test, and futures pay STT on the full contract value at every exit and every monthly rollover. At 10 × 1 the long-short version lost 3.1% a year.

It also needs more capital than a ₹10 lakh account has. One Nifty futures lot is worth about ₹17 lakh, so trading it without leverage needs at least that much.

What we checked

• In the first half of the period, 2006 to 2015, Supertrend kept 9.6% against 11.3% for buy and hold. In the second half, 2016 to 2026, it kept 8.7% against 10.6%. Its worst fall was smaller in both halves.
• On the Nifty 500 it kept 10.4% against 11.8%. On the Bank Nifty it kept 7.3% against 13.5%.
• Acting at the next day's close instead of the signal day's close cost 1.8% a year. Nifty opening prices are unreliable before NSE started its pre-open session in 2010, so we tested next-day opens from 2011 only. Filling at the next open cost 1.4% a year compared with the signal day's close.
• Halving slippage to 0.05% a trade adds about 0.4% a year, which doesn't change the conclusion.

What this test does not tell you

• We applied today's tax rules to all 20 years. Long-term gains on equity were tax-free until 2018, so buy and hold did better than shown here.
• The 1.3% dividend yield and 6% cash yield are flat averages. Actual yields rose and fell over the 20 years.
• This is daily Supertrend on an index. Intraday Supertrend on 5-minute charts, the other popular version, pays intraday charges many times a day and needs its own test.
• A different exit, position size or filter could change the result. We tested the rules as they are usually taught.

Daily Supertrend on the Nifty 50 is a way to own less of the market during long falls. It doesn't make more money than owning the index, and in a taxable account it makes less.