📊 TECHNICAL
Chandelier Exit
A volatility-based trailing stop that anchors to the highest high or lowest low over a lookback period, offset by a multiple of ATR, helping trend traders stay in a move while protecting gains.
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Live Demo — Chandelier Exit applied to NIFTY 50 (illustrative)
PriceEMA(9)EMA(21)SMA(20)
What is Chandelier Exit?
The Chandelier Exit was developed by Chuck LeBeau, a well-known systems trader. It is a volatility-adjusted trailing stop designed to keep traders in a trend for as long as possible while cutting losses quickly once the trend reverses. The name comes from hanging the stop from the "ceiling" of the trend, like a chandelier.
Formula
Long Exit = Highest High(N) - Multiplier x ATR(N)
Short Exit = Lowest Low(N) + Multiplier x ATR(N)Parameters
| Parameter | Default | Description |
|---|---|---|
| ATR Period (N) | 22 | Lookback for both the highest high/lowest low and ATR |
| ATR Multiplier | 3.0 | Number of ATRs subtracted/added |
| Direction | Long & Short | Whether to plot the long-exit line, short-exit line, or both |
Signal Interpretation
- In an uptrend, a close below the long-exit line signals the trend may be over.
- In a downtrend, a close above the short-exit line signals a potential end to the downtrend.
- The line only ever moves in the trend's favor, which is what makes it a proper trailing stop.
- A steepening exit line reflects rising ATR (volatility), giving the stop more room.
- Price hugging the exit line tightly suggests strong, low-volatility trending conditions.
Tips & Best Practices
- Use it as an exit/stop tool rather than an entry trigger; pair with a trend or breakout system for entries.
- A 3x ATR multiplier is traditional; tighten to 2x for faster exits in choppy markets or widen to 4x-5x for long-term trend following.
- Combine with a longer moving average filter to avoid exits during minor pullbacks in a strong trend.