Chandelier Exit: a trailing stop hung from the highest high

What it measures

The Chandelier Exit places a stop a multiple of ATR below the highest high of a lookback — hung from the ceiling, which is where the name comes from.

Because the anchor is the highest high rather than the current price, the stop rises as the trend makes new highs and holds still during a pullback rather than following price down.

It is designed to keep you in a trend through normal retracements and get you out when the retracement stops being normal.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Find the highest high over the lookback period.

2. 2

   Compute ATR over the same period.

3. 3

   The long exit is the highest high minus the multiplier times ATR.

4. 4

   The short exit is the lowest low plus the same amount.

Settings

Twenty-two periods with a three-ATR multiplier is the original. Lowering the multiplier tightens the exit and takes you out of trends earlier; raising the lookback makes the anchor more stable and the line slower to rise.

How to read it

• The gap between price and the line is how much room the position currently has, expressed in volatility rather than in price.
• The line rising steeply means new highs are arriving; a flat line means the market has stopped extending.
• A close through the line is the exit. A wick through it is not, unless you have decided otherwise in advance.
• It is an exit tool with no entry logic at all, and pairing it with a trend filter is the intended use.
• Against SuperTrend, the difference is the anchor: SuperTrend hangs its band off a moving midpoint, so it drifts down with price during a pullback, while the Chandelier hangs off the highest high and simply stops moving. That makes the Chandelier the more patient of the two in a trend that breathes.

Where it misleads

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