The Chande Kroll Stop indicator we are going to talk about in today's article was invented by two technical analysts, Tushar Chande and Stanley Kroll. It belongs to the group of trend-following indicators. Its function is to detect protective stops thanks to the calculation of the average true volatility range of the markets.
Contents
How do you set the Chande Kroll stop on IQ Option trading chart?
Prepare your chart which means deciding what financial instrument you are going to trade and at what time frame. Then, click on the Chart analysis icon in the bottom left corner of the trading interface. Go to the section Other under the Indicators tab. You will find the Chande Kroll Stop in the list that will unfold on the right side. The indicator will be added to your chart after clicking on its name.
Remember that you can also start typing the name of the indicator you want to find in the search box in the top right corner of the Chart analysis window.
The indicator comes with the settings which you can change if needed. There is the ATR period, Stop period, Multiplier as well as colours and display settings.
The ATR period specifies the calculations time for the volatility of values and the initial stop level.
The Stop period is used to calculate the time of the last stop.
Multiplier defines how far away the stop will be from the prices. For instance, if you are using a multiplier of 2, it means that your stop loss will be placed at a distance 2 times greater than the average volatility of the value.
Using the Chande Kroll Stop indicator in trading on the IQ Option platform
Which is the best stop loss indicator?
Chande and Kroll's indicator is based on market volatility. It intends to catch the momentum of the asset and allow to place protective stops. It consists of two lines that run across the price chart. A green line is a long stop line and a red is a short stop line. You should close long trades when the price falls beneath the green line. Close short transactions when the price rises over the red line.
The general idea is to keep the trade open as long as the price is moving in the proper direction. The Chande Kroll Stop automatically tells you how you should modify the placement of stops. They are flexible but you need to adjust your stop loss manually.
The trailing stop for short positions is the highest stop reached over time. It is following the price when it is moving downwards but it stops when the price goes up. You can see on the chart below that in such a case stop line moves horizontally.
The stop for long positions is the lowest reached during the period of time. The trailing stop follows the price when it moves in your direction. It remains the same when the price falls.
The Chande Kroll Stop indicator may also be used to predict the upcoming change in the trend. Observe the two lines of the indicator and when the red one crosses above the green, you can assume the uptrend begins to form. When the red line crosses below the green one, you can expect a downtrend soon.
Summary
The Chande Kroll Stop indicator calculates the volatility of the underlying asset. It consists of two lines. One indicates the stop level for long transactions and the other one for short trades.
The stop is the highest or the lowest reached by the value. It follows the price when the price is moving in your direction and remains unchanged in case the value falls.
The Chande Kroll Stop is a trend following indicator and you should use it to trade in the direction of the trend.
Go to your IQ Option demo account and add the Chande Kroll Stop indicator to the chart. Practice trading with it there before you will move to the live account.
If you wish to share your thoughts on the indicator I have described today, please do it in the comments section below. I would be truly glad to hear from you.
Wish you good luck!