The Chandelier Exit trading indicator is a volatility-based indicator developed by Chuck Le Beau and introduced to traders by Alexander Elder in Come Into My Trading Room. Its purpose isn’t to tell you when to enter a trade—it’s designed to guide you out when the trend might be over.
Think of it like a safety line that trails just behind your progress. It protects your trading positions, letting you stay in a long position while giving the market room to breathe. If the price action drops far enough—based on the average true range (ATR)—it signals a possible trend reversal point and tells you, “This trend might be done; time to get out.”
For traders who want to reduce stress and spend less time glued to screens, and value structure and precision in their trading style, the Chandelier Exit can be a game-changer.
How the Chandelier Exit Works?
At its core, the Chandelier Exit relies on Average True Range (ATR)—a measure of market volatility. When prices are swinging widely, the stop loss exit points adjust further away from the current price. In low-volatility markets, it stays tighter.
Chandelier Exit Indicator Formulas
Formulas for long and short positions
- For Long Positions
Chandelier Exit (Long) = Highest High (n) – ATR(n) × Multiplier - For Short Positions
Chandelier Exit (Short) = Lowest Low (n) + ATR(n) × Multiplier
Common settings:
- n = 22 trading days (roughly one trading month)
- Multiplier = 3
These settings allow the trailing stop loss to accommodate market volatility while protecting profits. You can adjust them based on the trader’s risk tolerance and trading style. Crypto trading or fast-moving tech stocks often benefit from higher multipliers like 4 or 5.
Chandelier Exit Example Calculation:
Let’s say:
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The highest high over 22 trading days is $50
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The ATR(22) is $2.50
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You’re using a multiplier of 3
Chandelier Exit = $50 – (3 × $2.50) = $42.50
That’s your stop loss based on market volatility. You’re in the long position as long as the price stays above $42.50. If it drops below, you’re out—with profits locked in.
The Chandelier Exit adjusts dynamically, trailing the stop loss based on the highest high or lowest low, but never lowering once established.
Why Systematic Traders Use Chandelier Exit?
Discretionary traders often struggle with exit decisions. They hesitate. They second-guess. They exit too early or hold on too long.
Systematic traders avoid this by using technical indicators that they can backtest. The Chandelier Exit Indicator gives traders a clear, objective exit signal—eliminating emotional decision-making.
This is critical for anyone building a reliable, scalable trading strategy. Here are some benefits of the indicator for systematic traders:
- Clear exit rules that eliminate emotional decisions
- Adaptive exit points that adjust to market volatility
- Backtestable exit strategy across multiple trading systems
- Easy to automate with trading software like TradingView and Amibroker
You’ll never again be stuck asking, “Should I exit a long trade now?” or “Should I exit short before the market reverses?” The rule tells you when it’s time. That reduces decision fatigue and increases trader confidence.
Where Traders Go Wrong with Chandelier Exits?
Used properly, the Chandelier Exit can be one of the most effective technical indicators for managing risk. But many traders misuse it or expect it to do too much.
Using it as a signal for entry
The indicator is designed as a stop loss exit tool, not a trading signal.
Over-optimizing settings
Traders use curve-fitting to make the indicator look perfect in backtests, but it won’t hold up in live trading positions, chosen parameter values must be robust.
Ignoring volatility profiles
A trailing stop-loss based on the average true range for an ETF won’t work the same way for high-volatility assets like crypto.
Failing to test
Chandelier Exit can be used effectively when tested across different market conditions and trading strategies.
How to Use the Chandelier Exit Effectively?
The real power of the Chandelier Exit Indicator comes when you integrate it into a comprehensive trading strategy.
Use it as a trailing stop-loss within a trend-following system
After an entry signal—say, a breakout or moving average cross—you let the Chandelier Exit handle the trade management. As long as the price stays above the trailing stop, you hold the trade.
Combine it with other Indicators
Pair it with momentum indicators like RSI or Stochastics for a complete strategy. Momentum signals your entry; the Chandelier Exit handles the exit.
Adjust it based on the Instrument
For less volatile assets, a multiplier of 2.5 to 3 may suffice. For crypto or high-volatility stocks, 4 or 5 is often more appropriate.
Automate it
Once you’ve defined your rules, use software like Amibroker, TradingView, or other platforms to automate execution. This removes emotion and reduces time spent managing trades—especially useful if trading multiple markets like ASX, US stocks, and crypto.
Backtest thoroughly
Test how the indicator performs across different markets, timeframes, and strategies. Does it preserve profits? Reduce drawdowns? Improve expectancy? Use data to answer these questions.
When the Chandelier Exit Works Best?
The Chandelier Exit Indicator shines in trending markets—when prices make higher highs or lower lows. It allows traders to stay in the trend longer without guessing the top or bottom. This makes it ideal for:
- Trend-following systems
- Swing trading
- Crypto trading strategies
- Multi-market systems that include high-volatility instruments
It can get hit more frequently in choppy or sideways markets, so it’s important to combine it with filters that identify trend conditions or increase the ATR multiplier to reduce false exits.
Final Thoughts: Is the Chandelier Exit Right for You?
If you’re managing risk based on gut feel, random exits, or news speculation, this technical analysis indicator gives you structure.
If you’re building or refining a systematic trading strategy, the Chandelier Exit provides a stop-loss based on market volatility to protect profits while adapting to price action.
But most importantly, if you want to trade smarter, reduce stress, and increase consistency, the Chandelier Exit is a must-have in your trading toolbox.
Take the Next Step
Learning to use the Chandelier Exit is valuable—but learning how to build a complete system around it is where you create real edge.
That’s exactly what we teach in The Trader Success System. You’ll learn how to develop, test, and trade profitable trading strategies that fit your goals, risk tolerance, and trading style.
If you’re serious about mastering systematic trading, stop piecing it all together alone.
Let’s fast-track your journey to consistent results so you can trade confidently and clearly.
Remember – You are only one trading system away!
Adrian
Founder – Enlightened Stock Trading
