Chande Kroll Stop indicator series is a trend following indicator that automatically places protective stops based on upward and downward volatility in trading markets. The indicator depends on the Average True Range that makes it possible for traders to measure the volatility to achieve this. As the case with many indicators in this category, Chande Kroll Stop indicator helps traders to manage their profits by keeping positions open as long as they move in their favor.
Features of Chande Kroll Stop indicator
• ATR period
• Stop period
• Multiplier or coefficient
• Use of green line for long positions.
• Use of red lines for short positions.
• Use of the volatility of a recent market.
• Average true range.
Calculating the Chande Kroll Stop
The indicator is calculated using the following steps. (Click this link to access an economic calendar for your trading strategies )
• Determine the true range of the last 10 bars by the use of arithmetic mean formula
• Calculate an extended stop by picking the highest of the 10 bars.
• Calculate a preliminary stop by subtracting a 3 x ATR multiple from the highest high
• Calculate a short stop by determining the lowest of the 10 bars.
• Calculate the preliminary stop by adding a 3 x ATR multiple from the lowest low.
Note that the two preliminary has no resets and continues regardless of whether the market is down or up-trend. The next step in the calculation is the application of a 20-bar reference period. The last preliminary short and long are used to plot the levels used for the Chande Kroll Stop.
Chande Kroll Stop Indicator | Indicator Series Click To TweetUnderstanding the Chande Kroll Stop indicator
The indicator protects the profits by ensuring that trade remains open as long as it moves in the right direction. Traders do not need to manually reset the trailing stop as it is automatic, just as the fixed stop-loss.
Whenever prices cross the blue line, a trader should take their long positions. On the other hand, whenever prices move over the red line, a trader should close the short positions.
Chande Kroll Stop can assist traders in detecting trend changes. It is easy to determine a new uptrend when the blue line crosses above the red line. A downtrend is also defined when the red line crosses below the blue line.
Uses of the Chande Kroll Stop indicator
Every trader should always consider trading when the two-line crosses.
It is the best time to buy when prices cross above both lines.
A trader should consider selling when the price crosses below the lines.
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