The Supertrend is a trend-following indicator that helps identify the current market trend and generates buy and sell signals accordingly. It is calculated using the Average True Range (ATR) and the average of High and Low prices as the source. By adjusting to market volatility, the Supertrend indicator highlights whether the market is in an uptrend or downtrend and signals potential entry and exit points. Once the closing price crosses one of the supertrend lines, it indicates a change in momentum.