Chande Kroll Stop (CKSP)
period = 10 (2–200) • multiplier = 3 (1–5) • smooth_period = 20 (1–50) Overview
The Chande Kroll Stop, introduced in the 1994 book "The New Technical Trader" by Tushar Chande and money management expert Stanley Kroll, is a volatility-based trailing stop system designed to help traders manage profits by keeping positions open as long as they move favorably. This powerful risk management tool creates two distinct stop lines - red for short positions and green/blue for long positions - that dynamically adjust based on market volatility.
Unlike fixed stop-loss orders that can be triggered prematurely during volatile periods, the Chande Kroll Stop adapts to changing market conditions using Average True Range (ATR). This ensures stop levels are placed at appropriate distances from current prices - wider stops during high volatility and tighter stops in calm markets - preventing unnecessary exits while still protecting capital when trends reverse.
Interpretation & Trading Signals
Entry and Exit Signals:
- Buy Signal: Price moves above Chande Kroll Stop line after being below - enter long position
- Sell Signal: Price falls below stop line after being above - exit long or enter short
- Profit Protection: Stop moves with trend to lock in gains as position develops
- Risk Minimization: Stop activates when price reverses, limiting potential losses
Default Settings (2025):
- ATR Period [p]: 10 periods (measure volatility)
- ATR Multiplier [x]: 1-3x (typical range, default 1 on TradingView)
- Stop Lookback [q]: 9 or 20 periods (smoothing parameter)
- Optimization Required: Backtest different settings for your specific market
Ideal Trading Styles:
- Trend Traders: Ride trends while protecting profits as they develop
- Swing Traders: Hold positions for days/weeks with dynamic risk management
- Volatility-Based: Perfect for traders who monitor and adapt to market volatility
- Multi-Market: Works across stocks, forex, commodities, and derivatives
Example Usage
Code examples will be available once the Rust implementation is complete.