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Thu, Jun 5th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Chandelier Exit Indicator

Indicator Type: Overlay

Chart Type: Interactive Charts Only

Developed by Charles Le Beau and featured in Alexander Elder's books, the Chandelier Exit sets a trailing stop-loss based on the Average True Range (ATR). The indicator is designed to keep traders in a trend and prevent an early exit as long as the trend extends. Typically, the Chandelier Exit will be above prices during a downtrend and below prices during an uptrend.

Sample Chart:

Long:

Chandelier Exit Long Indicator

Short:

Chandelier Exit Short Indicator

Calculation:

The Chandelier Exit formula consists of three parts: a period high or period low, the Average True Range (ATR) and a multiplier. Using the default setting of 22-periods on a daily chart, the Chandelier Exit will look for the highest high or lowest low of the last 22 days. Note that there are 22 trading days in a month. This parameter (22) will also be used to calculate the Average True Range.

Chandelier Exit (long) = 22-day High - ATR(22) x 3 
Chandelier Exit (short) = 22-day Low + ATR(22) x 3

As shown in the formulas above, there is a Chandelier Exit for long positions and one for short positions. The long position exit hangs three ATR values below the 22-period high. This means it rises and falls as the period high and the ATR value changes. By contrast, the short position exit is placed three ATR values above the 22-period low. The spreadsheet examples show sample calculations for both.

Interpreting Chandelier Exits

The Chandelier Exit is basically a volatility-based system that identifies outsized price movements. Le Beau defined volatility by using the Average True Range, which was developed by Welles Wilder, creator of RSI and the Average Directional Index. ATR uses the prior close, current high and current low to determine the “True Range” for a given period. After some smoothing, the daily True Range values evolve into the Average True Range for a given period of time.

By setting the Chandelier Exit for longs three ATR values BELOW the period high, the indicator provides a buffer that is three times the volatility. A decline strong enough to break this level warrants a reevaluation of long positions. The opposite applies to short positions. The Chandelier Exit for shorts is set three ATR values ABOVE the period low, which provides a volatility-based buffer. An advance strong enough to exceed this level warrants a reevaluation of short positions.

Chandelier Uptrend

Sometimes chartists will see a strong uptrend, but not know where to jump on and when to exit. The Chandelier Exit can be used to define the trend and set a trailing stop-loss. With the Chandelier Exit providing the stop-loss, traders would then need to find an indicator to trigger buy signals within this trend. A sensitive momentum oscillator can be used to capture short-term oversold conditions.

Chandelier Downtrend

Some stocks are more volatile than others and require a bigger buffer, which means the multiplier should be increased. Chartists should increase the ATR multiplier for more volatile stocks, such as techs. 

The Chandelier Exit is good for stops, but chartists need to use basic chart analysis or a momentum oscillator to time entries. The Commodity Channel Index (CCI) can be used to identify short-term overbought conditions within a downtrend. CCI becomes overbought with a move above +100. A subsequent move back below +100 signals that momentum is turning down again.

Conclusion

The Chandelier Exit is mostly used to set a trailing stop-loss during a trend. Trends sometimes extend further than we anticipate and the Chandelier Exit can help traders ride the trend a little longer. Even though it is mostly used for stop-losses, the Chandelier Exit can also be used as a trend tool. A break above the Chandelier Exit (long) signals strength, while a break below the Chandelier Exit (short) signals weakness. Once a new trend begins, chartists can then use the corresponding Chandelier Exit to help define this trend.

Default Parameters:

  • Direction: Long or Short
  • Period: In its standard application, a period of 22 (22 trading days in the month) is used on a Daily chart.
  • Multiplier: The multiplier for the ATR.

(Source: StockCharts)

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