On This Page
- What is the Chandelier Exit?
- How is the Chandelier Exit calculated?
- Worked example
- Rolling-window vs since-entry anchor
- Chandelier Exit example: raw and locked levels
- How to size a position from the Chandelier Exit
- Chandelier Exit vs a 10% trailing stop on the chart
- Limitations of the Chandelier Exit
- Bottom line
- FAQ
Key Takeaways
- The long Chandelier Exit equals the highest high reached over the lookback minus a multiplier times Average True Range, and the short version adds that distance to the lowest low.
- Standard settings are a 22-period ATR with a 3× multiplier, a lookback chosen because roughly 22 trading days make up a calendar month on a daily chart.
- A new high lifts the long level and a wider ATR pulls it down: the candidate moves by the change in the high minus the multiplier times the change in ATR.
- The raw offset equals k × ATR. A locked long stop retains the higher of its previous value and the new candidate.
- The published calculation is not one-way: a jump in ATR or an old high aging out of the 22-bar window can plot a level below the prior bar, so many traders lock the long level so it cannot move down.
- Specify the decision bar, order rule and position size. Measure the planned entry-to-stop distance from the actual entry price.
What is the Chandelier Exit?
The Chandelier Exit is a volatility-based trailing stop that hangs a multiple of Average True Range below the highest high of a lookback for a long position, or above the lowest low for a short position. Standard settings use a 22-period window, 22-period ATR and a 3× multiplier, so the exit level trails price at a distance that widens and narrows with volatility.
Set five choices before entry: the extreme-price window, the ATR smoothing, the multiplier, the bar that decides the exit and whether the level locks. Together they set where the stop sits on every bar.
How is the Chandelier Exit calculated?
Long candidate = highest high over N bars − k × ATR(N). Short candidate = lowest low over N bars + k × ATR(N).
This example uses a current-inclusive 22-bar window, Wilder ATR(22) and k = 3. Update ATR from the prior value using ATR = prior ATR + (current true range − prior ATR) / 22.
For the same open long position, locked level = max(previous locked level, new candidate). For the same open short position, use min instead. A new position starts a fresh lock from its own first candidate.
The raw long candidate changes by Δhigh − k × ΔATR. A new high and a larger ATR act in opposite directions. An old selected high leaving the window can also change the anchor.
Formula
Long Chandelier Exit = highest high over N periods − (k × ATR(N)); Short Chandelier Exit = lowest low over N periods + (k × ATR(N)); the published version is recalculated every bar and can move either way, while a locked variant carries the prior level forward whenever the new value would move against the trade.- N is the lookback in bars, 22 in the default settings, applied to both the extreme-price window and the ATR period.
- k is the ATR multiplier, 3.0 in this example. It converts the selected ATR into a price distance from the chosen extreme.
- ATR(N) is Average True Range over N periods, where true range is the greatest of the current high minus the current low and the two absolute distances from the prior close.
- The highest high is the ceiling the level hangs from. Take it from the last N bars to follow the published study, or from the bars since entry to follow Le Beau’s trade-management framing; the two agree whenever they pick the same high.
- The short candidate is lowest low + k × ATR. A locked short stop retains the lower of its previous value and the new candidate.
Worked Example
A trader holds 300 shares bought at $100.00 and trails them with a 22-period window and multiplier 3. At entry the high is $101.50 and ATR is $2.40; later bars carry the high to $118.00 and then $121.00. The chart below runs the same rule bar by bar on a separate price series.
- Trail distance at entry: 3 × $2.40 ATR = $7.20 per share
- Initial exit reference: $101.50 − $7.20 = $94.30. Planned entry-to-stop distance: $100.00 − $94.30 = $5.70 per share
- High extends to $118.00 with ATR still $2.40: $118.00 − $7.20 = $110.80
- Volatility contracts to ATR $1.80 as the high extends to $121.00: $121.00 − (3 × $1.80) = $115.60
- Volatility then expands to ATR $3.60 with the high unchanged: the published calculation returns $121.00 − $10.80 = $110.20, while a locked version carries $115.60 forward
- Evaluate a later $114.90 close with selected high $121.00, current ATR $3.60 and prior locked level $115.60
The $114.90 close is below the locked $115.60 level and above the raw $110.20 candidate, so the locked rule exits and the raw rule stays in. Selling at the $114.90 close, 300 shares earn ($114.90 − $100.00) × 300 = $4,470 before costs and give back $6.10 per share from the peak. A 10% stop from the same $121 peak sits at $108.90 and is still holding.
Rolling-window vs since-entry anchor
A rolling window selects its extreme from the last N bars. A since-entry anchor selects its extreme from bars belonging to the trade.
They agree when they select the same extreme. They can differ because the rolling window contains a pre-entry extreme or because a trade’s earlier extreme has left that window.
Chandelier Exit example: raw and locked levels
With high $101.50 and ATR $2.40, the candidate is $94.30. A $100 entry therefore has a planned $5.70 entry-to-stop distance.
A later high of $118 and ATR $2.40 gives $110.80. At high $121 and ATR $1.80, the candidate reaches $115.60. With the high still $121 and ATR now $3.60, the raw candidate is $110.20 while the locked level remains $115.60.
A $114.90 close below the $115.60 locked level triggers the exit. Selling at that close, 300 shares entered at $100 produce $4,470 before costs. The peak-to-fill distance is $6.10, or 1.69 times the current $3.60 ATR.
How to size a position from the Chandelier Exit
A $2,000 planned loss budget divided by the $5.70 entry-to-stop distance supports 350 whole shares. Dividing by the $7.20 high-to-stop offset gives 277 shares, which sizes the risk from the high instead of from your fill and leaves part of the budget unused.
Holding the stop fixed, a higher long entry increases entry-to-stop distance. A lower entry above the stop reduces it. Recalculate size using the actual planned entry and stop.
Find each structure’s loss at the Chandelier level in the Options Profit Calculator: that loss sets the contract count, the way the $5.70 stop distance sets the share count.
Chandelier Exit vs a 10% trailing stop on the chart
The chart runs the rule bar by bar from a fully seeded ATR. Its locked level reaches $112.58 at bar 9, and the first later close below it comes at bar 12 at $111.60, the exit.
The 10% trail follows the running high bar by bar and reaches $108.90 once the high reaches $121, so it is still below price when the Chandelier exit fires at bar 12.
Limitations of the Chandelier Exit
- Lock the level to keep it moving one way. In the published version, a jump in ATR or an old high leaving the 22-bar window can lower a long level.
- Check the offset against the trade plan at entry. It follows recent ATR: after a quiet stretch the level sits close to price; after a volatile one it can sit far away.
- Pair it with an entry rule. The level tells you where the trade ends, and a separate condition decides where it starts.
- Match the window, ATR smoothing, multiplier, lock and anchor before comparing your level with another platform’s, because each one moves it.
- Size for a fill beyond the level. The level is a trigger and the market sets the fill. When price gaps through the level or moves fast, a stop order executes beyond it; the example sells at the $114.90 close.
Bottom line
The Chandelier Exit hangs a stop from a recent price extreme at a distance set by current volatility, which gives a trend room to run while still defining the exit. Choose the anchor, settings and lock before entry, size from the actual entry-to-stop distance, and plan for a fill that can differ from the level.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Alexander Elder, Come Into My Trading Room (Wiley, 2002), chapter 6, Exiting Trades, pp. 180–182
- Fidelity: Average True Range
- SEC Office of Investor Education: Investor Bulletin on Stop, Stop-Limit, and Trailing Stop Orders
- Fidelity: Trailing Stop Orders
How entries are sourced, calculated and updated: editorial methodology.