Tushar Chande and Stanely Kroll introduced the Chande Kroll Stop in “The New Technical Trader.” It is a volatility-based trailing stop, and like the majority of indicators in this group, it will assist you in controlling your profits by maintaining open positions as long as the market is moving in your favor. This article will contrast the Chande Kroll Stop with the Chandelier Exit. For more information, watch the video or read on.
Calculating the Chande Kroll Stop
There are two stop lines—one green for long positions and one red for short jobs. Once prices fall below the green line, a long position will be closed. In contrast, short positions are closed when prices rise above the red line.
First, the arithmetic means the formula is used to determine the Average True Range of the most recent 10 bars. The highest high of the last 10 bars is chosen to represent a long halt. A 3 x ATR multiple subtracts the highest high to determine a preliminary stop. The lowest of the last 10 bars is chosen for a brief hiatus. The lowest low is multiplied by three times ATR to determine an initial shortstop.
No resets are made to the two initial stops; they remain in effect whether the market is upward or downward. In a subsequent stage, the preliminary stops are used to calculate the long holiday and shortstop:
The long stop is the lowest value of the 20 most recent inadequate extended visits.
The shortstop is the 20 most recent preliminary quick stops’ highest value.
Trendbias: Fill Area vs. Paintbars
The Chande Kroll Stop can be used to identify a trend bias. Once the price has risen above the fill zone between the stop lines, green paintballers will begin to plot. A blue fill region may additionally validate your paintball trend data. The red line will then pass in front of the green line. Finally, a fill area with a gold color will show a market that is trending sideways, with the red line moving over the green line.
When the price has moved below the fill region, on the contrary, red paintballers will plot. You will observe gray paintballs if prices fluctuate at or close to the fill area. A blue fill region will also confirm a bearish trend when the green line crosses over the red line. When the red line crosses the green line, the gold-colored fill region will once more indicate a sideways scenario.
Chandelier Exit vs. Chande Kroll Stop
Considered to be a development of the chandelier stop is the Chande Kroll Stop. The Chande Kroll Stop adds more texture in contrast to the chandelier exit, which offers “stop and reverse” signs that can be either lengthy or short. Pay attention to the fill region between the stop lines to distinguish between trend and sideways scenarios.
Align the ATR parameters for both indicators to compare the Chande Kroll Stop and Chandelier Exit indicators. You need to activate the “donchian anchor” and deactivate the “trailing stop” option for the chandelier stop. The highest high in the lookback period is subtracted from the ATR multiple to determine a long halt. The shortstop is located by multiplying the lowest low by the ATR. The Chande Kroll calculation’s initial step was also calculated using this method.
By superimposing the Chande Kroll Stop, this is seen. The ATR formula is then changed to “Wilder,” matching the Chandelier Stop calculation. Finally, the second step of the Chande Kroll Stop calculation is removed by choosing a reference period of “1,” making it the same as the Chandelier Stop.
The first step in the Chande Kroll computation is the same as the Chandelier Stop, as seen above. The Chande Kroll plots are reached by adding a second step and using a reference period of the initial stops. Compared to the chandelier stop, these stop levels are farther from the current price. So, compared to the Chandelier Stop, you can use a smaller ATR multiplier and a shorter lookback.
You should consider combining Ichimoku trend and momentum setups with the Chande Kroll Stop for trade management. The Ichimoku indication is part of our premium suite, and we also have a basic Ichimoku version in our library of NinjaTrader indicators.
Please click the link below to download the Chande Kroll Stop indicator for NinjaTrader 8: