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Volatility Stop by Chande & Kroll

Re: Chandre & Krolls Volatility Stop

* To: metastock@xxxxxxxxxxxxx
* Subject: Re: Chandre & Krolls Volatility Stop
* From: "C. Baude" <BAUDECB@xxxxxxxxxxxxx>
* Date: Sat, 30 Jun 2001 08:16:33 -0400
* In-Reply-To: <000801c1002c$c6930750$7f52fea9@xxxx>
* References: <000801c1002c$c6930750$7f52fea9@xxxx>
* Reply-To: metastock@xxxxxxxxxxxxx
* Sender: owner-metastock@xxxxxxxxxxxxx

====================================================================
On Thu, 28 Jun 2001 19:48:04 -0400, you wrote:

> Can someone direct me to the publication that details the Chande & Krolls Volatility Stop and its usage.
>
> Thanks,
>
> Jim Barone


>From my archives - untested.
====================================================================
Volatility-Based Trailing Stops - Stop loss from Chande & Kroll's The New Technical Trader p.167. There are three input variables to play with.

{Volatility Stop (Long)}
Pds1:= Input("ATR Lookback?",2,100,10);
Mult:= Input("ATR Multiplier?",1,20,3);
Pds2:= Input("HHV Lookback?",2,100,20);
PrelimStop:= HHV(H,Pds1) - ATR(Pds1)*Mult;
ActualStop:= HHV(PrelimStop,Pds2);
ActualStop

{Volatility Stop (Short)}
Pds1:= Input("ATR Lookback?",2,100,10);
Mult:= Input("ATR Multiplier?",1,20,3);
Pds2:= Input("LLV Lookback?",2,100,20);
PrelimStop:= LLV(L,Pds1) + ATR(Pds1)*Mult;
ActualStop:= LLV(PrelimStop,Pds2);
ActualStop


Volatility Stop

Pds1:= Input("ATR Lookback?",2,100,10);
Mult:= Input("ATR Multiplier?",1,20,3);
Pds2:= Input("HHV Lookback?",2,100,20);

PrelimStop1:= HHV(H,Pds1) - ATR(Pds1)*Mult;
ActualStop1:= HHV(PrelimStop1,Pds2);
ActualStop1;

PrelimStop2:= LLV(L,Pds1) + ATR(Pds1)*Mult;
ActualStop2:= LLV(PrelimStop2,Pds2);
ActualStop2;

 

From: Harvey Pearce <hhp@xxxxxxxx>

Use the 'short one' when you would sell short - i.e. in downtrends, and the 'long one' in uptrends. Stay out of the market or use something else when things are flat.

For long trades, subtract the amount 3*ATR(10) from the highest high over the last 10 days. We'll call this quantity our preliminary long stop. Finally, use the highest value of the preliminary stop over the last 20 days as the actual stop for long trades.

For short trades, add the amount 3*ATR(10) to the lowest low of the last 10 days, calling this quantity our preliminary short stop. Finally, use the lowest value of the preliminary short stop over the last 20 days as the actual stop for short trades.

Chande goes on to suggest experimenting with the multiplier and the time periods to suit the stop to your trading vehicle and style.

I kept Chande's terminology, so you can easily verify my coding.

As to whether one is above or below the other, I would say it is not relevant because only one can apply at a time. The point is to have a stop that follows the trend but strikes a balance between being close enough that you don't take large losses yet far enough away that you don't get bounced out too easily. There are several ways to define a trend and you could write code to switch between the two. That would not be very different from Andrew Abraham's "Trading the Trend" (TASC 09/1998).
Source / From: TOP
http://purebytes.com/archives/metastock/

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