Chande Kroll Stop on Gold

What it shows

A blue line and an orange line over the candles. The orange one comes from the highs and the blue one from the lows, and both move in flat steps.

How Pravex works it out

1. Work out the ATR over the lookback, 10 candles by default.
2. First high stop = the highest high over the lookback − distance in ATRs × ATR.
3. First low stop = the lowest low over the lookback + distance in ATRs × ATR.
4. Orange line = the highest first high stop over the final lookback. Blue line = the lowest first low stop over the same span.
5. Invented figures for the arithmetic: with a highest high of 105, an ATR of 4 and a coefficient of 1, the first high stop is 105 − 4 = 101.

Settings

Setting	Default	What changing it does
Lookback	10	How many candles the ATR and the highest high and lowest low cover. A longer length makes the lines wider apart and slower.
Distance in ATRs	1	How many ATRs each first stop is moved away from its extreme. A larger value pulls the high stop further down and the low stop further up.
Final lookback	9	How many candles the final highest and lowest are taken over. A longer value makes the two lines step less often.

How traders read it

Look at where price closes against the two lines. Closing below the orange line means price has fallen more than the allowed distance from its recent peak. Closing above the blue line means it has risen more than that distance from its recent trough.

Both lines are a highest or lowest of recent values, so they move in steps and stay flat for several candles. Used as trailing levels, a close beyond one of them is read as the move changing.

When it misleads

In a tight range the two lines can sit close together or cross, and price closes through them back and forth. After a very large candle the ATR grows and both lines move away from price at once, so they can look loose for the next 10 candles. Gold has no weekend candles, so the Monday open is compared with Friday’s extremes as if the two were neighbours.

Questions and answers

Should the Chande Kroll Stop be wider on gold?

Pravex starts at a lookback of 10, 1 ATR and a final lookback of 9, which keeps both lines close to price on hourly gold. Raising the distance to 2 or 3 ATRs leaves room for the wider candles of the New York morning, the widest hours in our own gold measurements, before a close passes a line.

Which line is the stop for a long position?

The blue line, built from the lows, is the one meant for longs, and the orange one, built from the highs, for shorts. Which one sits under the candles depends on the move, so read them by position: the line below price is the one a long position would trail.

Chande Kroll Stop or Volatility Stop for trailing gold?

The Volatility Stop is one line that flips sides with the trend. The Chande Kroll Stop draws two lines from recent highs and lows and does not flip.

What does the distance in ATRs do?

It sets how many ATRs each first stop is moved away from its extreme. A larger value pulls the lines further from price and gives a move more room before a close passes them.

Related: Volatility Stop, Median, Vortex Indicator, every indicator.