The Chande Kroll Stop was presented by Tushar Chande and Stanely Kroll in “The New Technical Trader”. It is a volatility based trailing stop and as most indicators in this category, it will help manage your profits by keeping positions open as long as they move in your favor. In this post we’ll compare theChande Kroll Stop vs Chandelier Exit, to learn more, watch the video or continue reading below:
The Chande Kroll Stop Calculation
Two stop lines are used, green for long positions and red for shorts. You’ll close a long position once prices drop below the green line. Conversely, short exits occur when prices move above the red line.
First, the Average True Range of the last 10 bars is calculated by applying the arithmetic mean formula. For a long stop, the highest high of the last 10 bars is determined. A preliminary stop is then calculated by subtracting a 3 x ATR multiple from the highest high. For a short stop, the lowest of the last 10 bars is determined. A preliminary short stop is then calculated by adding a 3 x ATR multiple to the lowest low.
The two preliminary stops have no resets, but continue, regardless of whether the market is in an up- or down-trend. In a second step, long stop and short stop are calculated from the preliminary stops:
- The long stop is the lowest value of the last 20 preliminary long stops
- The short stop is the highest value of the last 20 preliminary short stops
Trendbias: Paintbars vs. Fill Area
You may also use theChande Kroll Stop to spot a trend bias. Green paintbars will plot once price has moved above the fill area between the stop lines. Furthermore, a blue fill area may confirm your paintbar trend readings. The green line will then move above the red line. Finally, a gold colored fill area will indicate a sideways moving market, with the red line moving above the green line.
Opposite, red paintbars will plot when price has moved below the fill area. If prices are moving at or within the fill area, you will see gray paintbars. Furthermore, a blue fill area will confirm a bearish trend when the green line moving above the red line. Again, the gold colored fill area will signal a sideways scenario when the red line moves above the green line.
Chande Kroll Stop vs Chandelier Exit
TheChande Kroll Stop can be considered a further development of the chandelier stop. Whereas the chandelier exit only comes with “stop and reverse” signals, either being long or short, theChande Kroll Stop adds further texture. Specifically, the fill area between the stop lines may be used to distinguish between trend and sideways scenarios.
To compareChande Kroll Stop vs Chandelier Exit, align the ATR settings for both indicators. For the Chandelier Stop, you’ll want to have the “donchian anchor” activated and the “trailing stop” feature disabled. A long stop is found by subtracting the ATR multiple from the highest high in the lookback period. The short stop is found by adding an ATR multiple to the lowest low. This is the same approach as used for the first step of the Chande Kroll calculation.
This can be seen by overlaying theChande Kroll Stop. The ATR formula is then set to “Wilder”, aligning with the calculation used for the Chandelier Stop. Finally, by selecting a reference period of “1”, the second step of theChande Kroll Stop calculation is eliminated, making it identical to the Chandelier Stop.
Conclusion
As seen above, the initial step of the Chande Kroll calculation is identical to the Chandelier Stop. By adding a second step, a reference period of the preliminary stops is used to arrive at the Chande Kroll plots. These stop levels are further removed from price than the chandelier stop. Accordingly, you may apply a smaller ATR multiplier and shorter lookback than for the Chandelier Stop.
You may consider using theChande Kroll Stop for trade management together with Ichimoku trend and momentum setups. Our premium suite features the Ichimoku indicator and our NinjaTrader indicators library also has a basic Ichimoku version.
To download theChande Kroll Stop indicator for NinjaTrader 8, please follow the below link:
Other Library Indicators
The Chande Kroll Stop is found in our Trailing Stops category along with other indicators designed to protect open profits, such as: The ATR Trailing Stop, Chandelier Stop, Deviation Stop, HiLo Activator, SuperTrend M11, SuperTrend U11 and the Wilders Volatility Stop.
