Oil is one of the most lucrative assets traded by the professional. Long term traders use different chart pattern and important support and resistance level to trade the oil. The extremely increased volatility of oil makes trading much harder by using the simple technical method. Professional traders that are making a consistent profit, trading the oil always use some advanced technical analysis to avoid the false move and trend reversal.
Chande Kroll is a unique indicator which adapts perfectly to oil price movement and generates extremely profitable trade for the long term trader. Let’s see how the profession uses the Chande Kroll indicator to trade the oil:
Figure: Advanced oil trading strategy using the Chande Kroll indicator
The chart pattern is always the professional trader’s priority when it comes to oil trading. In the above figure, the oil price drops sharply and bounces back in the key support level to form the first bottom in of the triple bottom chart pattern. The oil price rises and fall holding the major support level for consecutive three times, forming the triple bottom bullish reversal chart pattern. In general, traders enters long after the valid break of the neckline of the triple bottom chart pattern but with the help of Chande Kroll indicator traders can take their long position very early with excellent risk reward ratio.
The Chande Kroll indicator has two bands. The upper band is colored and the lower one is colored green by default. In the above figure, the price penetrates the lower green band of the indicator after forming the third bottom. After a bullish candle close above the lower band of the indicator, the trader enters long into the market and rides the new bullish trend in oil price. Stop loss set just below the bottom three of the triple bottom chart pattern. But in reality, once the price enters into the green band of the indicator it rarely breaches it to test the low.