Chande Kroll Stop for Volatility-Aware Trade Exits
Summary
The document describes the Chande Kroll Stop, a trend-following indicator that plots separate stop levels for long and short positions. A trader may use the long-position line as a level for closing a purchase if price falls to it, and the short-position line as a level for closing a sale if price rises to it.
The explanation says the indicator uses true range, average true range, and period highs and lows to adjust its stop levels to market volatility. Wider spacing from price in more volatile conditions is intended to allow more fluctuation; closer spacing in quieter conditions is intended to respond sooner. The document attributes the indicator to Tushar Chande and Stanley Kroll’s book, The New Technical Trader. It provides a conceptual description but no formulas, parameter guidance, backtest results, or evidence that the stops improve performance. It also contains an inconsistency in its color labels for the long-position line.
Key ideas
- The indicator plots distinct stop levels for long and short positions.
- It uses true-range measures and period price extremes to set its levels.
- Higher volatility is described as moving the stop lines farther from current price.
- The text presents the indicator as a trend-following exit aid, not as a complete entry strategy.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.