Chandelier Exit

TL;DR. The classic ATR exit: a stop hung a few average true ranges below the highest high of the window for a long, and above the lowest low for a short. A close through the long line says the up move has given back more than its usual noise.

#What it measures

• How much give-back is normal. The distance from the extreme is the multiplier times the ATR, so the stop is wider in volatile markets.
• Where a long's trailing stop sits. The long exit follows the highest high, so it rises as the trend makes new highs.
• Where a short's trailing stop sits. The short exit follows the lowest low.

#Formula

#Inputs in AlgoLift

#Outputs in AlgoLift

#How to read it

• Close above the long exit: the up move is intact; pullbacks so far are inside the usual noise.
• Close below the long exit: price has given back more than the multiplier's ATRs from the high. Time to leave a long.
• The long exit falling: the line is not a ratchet. When the highest high leaves the window or the ATR widens, the line moves down.
• Both lines close together: a quiet, narrow market; small moves cross them.

#Best in, worst in

Best in exits for trend trades, where a volatility-sized give-back keeps the trade through ordinary pullbacks.

Worst in entries on its own, and in markets that gap: a stop judged on the close can be crossed by a wide margin.

#Three setups

#1. Exit a long on a close below the long exit

Enter with any rule, then add Set Exit Condition with a Comparison: the close less than Long exit. The mirror (close greater than Short exit) closes shorts.

#2. A trend gate from the two lines

Allow longs only while the close is above Long exit and shorts only while it is below Short exit: the trade waits until the last move has not been given back.

#3. Pair it with a breakout entry

Enter long on a close above the Donchian Channels upper band and trail the trade with the long exit, so the entry and the exit both read the same window.

#Common mistakes

• Using one line for both sides. The long exit is for longs, the short exit for shorts.
• A multiplier too small for the bar size. On 1-minute bars a multiplier of 1 sits inside the noise and exits nearly every trade early.
• Expecting an intrabar stop. A rule on the close fires at the bar's close, not when a wick touches the line.