Chandelier Exits: The Ultimate Trading Indicator You Need to Know

Chandelier Exits are a technical analysis indicator used to determine when to exit a long or short trade. The indicator gets its name from the way it follows the price action of an asset like a chandelier hanging from a ceiling.

Chandelier Exits are typically used to protect traders from large losses. They can also help traders to lock in profits and maximize their gains.

Note: Chandelier Exits work best in trending markets and may not be as effective in ranging markets.

Chandelier Exits are calculated by taking the highest high or lowest low of the last few periods and adding or subtracting a multiple of the Average True Range (ATR). The ATR is a measure of volatility.

For example, if the highest high of the last few periods was $50 and the ATR is 5, the initial Chandelier Exit would be $45 for a long trade. If the lowest low was $50 and the ATR is 5, the initial Chandelier Exit would be $55 for a short trade.

As the price of the asset moves up or down, the Chandelier Exit also moves up or down in relation to the ATR. This allows the trader to stay in a trend as long as it lasts, while also protecting themselves from large losses.

Chandelier Exits can be used in multiple ways in your trading strategy. Here are a few examples:

Exit signal: When the price of the asset crosses the Chandelier Exit line, it can be a signal to exit your position.

Trailing stop: As the price of the asset moves in your favor, you can move your Chandelier Exit up or down to lock in your profits and protect yourself from large losses.

Re-entry signal: When the price of the asset crosses back over the Chandelier Exit line, it can be a signal to re-enter the trend.

It's important to note that no trading indicator is foolproof. It's always wise to use additional indicators and analysis to confirm your trading decisions.

Calculating Chandelier Exits can be done using various tools such as trading platforms or dedicated software. However, if you want to calculate them manually, here's how:

1. Choose a period or number of periods to calculate the Chandelier Exit.

2. Choose a multiple of the ATR to use, such as 2x or 3x.

3. Calculate the ATR for the period(s).

4. For a long trade, subtract the ATR multiple from the highest high of the period(s) to find the Chandelier Exit. For a short trade, add the ATR multiple to the lowest low of the period(s) to find the Chandelier Exit.

5. As the price of the asset moves, recalculate the Chandelier Exit using the same formula.

Chandelier Exits are a powerful trading indicator that can help you stay in trends and protect yourself from large losses. By using Chandelier Exits in your trading strategy, you can increase your chances of success in the markets.

Remember to always use additional analysis and indicators to confirm your trading decisions, and never risk more than you can afford to lose. With practice and patience, you can master the art of trading with Chandelier Exits.