Extra indicators
Chandelier Exit
Trailing stop levels set a few ATRs away from the highest high (for longs) or lowest low (for shorts).
The idea in plain words
A stop should give the trade room to breathe in proportion to how much the market normally moves. The chandelier "hangs" the long stop from the highest high, at a distance of a multiple of the average true range.
How it is calculated
Long exit = highest high of N candles − multiple × ATR(N). Short exit = lowest low of N candles + multiple × ATR(N).
Long exit = HH(N) − m × ATR(N)
Short exit = LL(N) + m × ATR(N) (defaults N = 22, m = 3)How to use it
- As a trailing stop: keep a long position while the price stays above the long exit line.
- A close beyond the line is a common signal to leave the trade.
Drawing conclusions
- A wider multiple keeps you in longer trends but gives back more profit.
Example
XAUUSD daily: the highest high of 22 days is 2,450 and the ATR 28, so the long exit sits at 2,450 − 84 = 2,366. A close below 2,366 would end the trade.
Prices in examples are illustrative.
Watch out for
- In choppy markets the price can close beyond the line and turn back.
A little history
Developed by Chuck LeBeau and popularised by Alexander Elder in "Come Into My Trading Room" (2002).
Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.