Volatility & bandsChandelier Exit · CE
A trailing stop hung a few ATRs down from the highest recent high — LeBeau's way to ride trends.
Works best in trending marketsEngine-computed on a fixed sample series
What it is
The Chandelier Exit, devised by veteran systems trader Chuck LeBeau, is a volatility-based trailing stop that hangs your exit level a fixed number of Average True Range units below the highest high of a rising trade, like a chandelier hanging down from the ceiling. Its purpose is to keep you in a trend for as long as possible while getting you out promptly when price reverses by more than normal volatility would explain. Because it is tied to ATR rather than a fixed percentage, it automatically widens in volatile markets and tightens in calm ones, adapting the stop to conditions. The question it answers is: given how far price has run and how volatile it is, where should my trailing stop sit so that noise does not shake me out but a real reversal does? It is an exit tool, not an entry signal.
How it is calculated
For a long position, the Chandelier Exit = Highest High over the last n periods - (ATR(n) x multiplier), with the standard settings n = 22 and multiplier = 3. For a short position it flips: Chandelier Exit = Lowest Low over the last n periods + (ATR(n) x multiplier). The highest high or lowest low anchors the stop to the best price reached during the trade, and the ATR term sets the cushion, three average true ranges of room by default. As price makes new highs the long stop ratchets upward and, crucially, is only allowed to rise, never fall, so it locks in gains while trailing. The 22-period lookback approximates one month of trading days, and the 3x ATR multiplier is LeBeau's balance between giving trends room and cutting losses when they truly turn.
Reading it, step by step
The line plots as a trailing stop beneath price in an uptrend, or above price in a downtrend, and the rule is simple: stay in the trade until price closes through the line. In a healthy uptrend the exit climbs in steps as new highs are set, visibly locking in profit, and its distance below price reflects current volatility, wider in turbulent phases and tighter in quiet ones. A close below the long Chandelier Exit is the signal to get out, interpreted as a move beyond what normal volatility should produce and therefore a likely trend reversal. Because it only ratchets in the favourable direction, the line never loosens, so once tightened it stays tight. Traders read the gap between price and the line as a live measure of how much profit is currently protected.
Best timeframes and settings
The classic setting is a 22-period lookback with a 3x ATR multiplier, applied across daily charts for swing and position trades as well as intraday charts for shorter trends. Lowering the multiplier toward 2 tightens the stop, exiting sooner and protecting more profit at the cost of being shaken out of choppy trends, while raising it toward 4 gives trends more room but surrenders more open profit on a reversal. Shortening the lookback makes the highest-high anchor more responsive to recent action, and lengthening it anchors to a broader trend. It works on any liquid instrument because ATR scales to that instrument's own volatility. The central trade-off is the multiplier: tighter stops bank profit earlier but whipsaw more, and wider stops ride trends longer but give back more.
When and where to use it
Use the Chandelier Exit when you are already in a trending trade and want a disciplined, volatility-adjusted way to trail your stop rather than exit on a fixed target or a hunch. It shines in strong, sustained trends on liquid instruments, where its ratcheting stop lets profits run while defining a clear reversal exit. It is well suited to trend-following systems and to discretionary traders who struggle to hold winners, since it mechanises the hold-and-trail decision. It is less useful in sideways, rangebound markets, where price repeatedly closes through the trailing line and generates costly exits. Deploy it as the exit engine of a trend strategy, paired with a separate entry method, and relax or replace it when the market is not trending.
Strategies that use it
Trend-trailing exit: enter a trend by your chosen method, then trail the Chandelier Exit under the position, staying in until price closes through the line and letting the stop ratchet up automatically as the trend extends. Breakout ride: after buying a breakout, immediately place the Chandelier Exit as the stop so the trade is protected by volatility-scaled room from the outset. Stop-and-reverse: some systematic traders flip from long to short when price closes below the long Chandelier Exit and the short version engages, treating the crossover as both exit and entry, though this is more aggressive and better suited to strongly trending instruments. In every use its role is risk and exit management, leaving a separate signal to handle entries.
Combining it with other indicators
The Chandelier Exit pairs naturally with trend-identification tools, such as a moving average or ADX to confirm a trend is underway before trailing a stop within it. Entry oscillators or breakout signals supply the trade the Chandelier then manages. Because it is built on ATR, it dovetails with other ATR- or volatility-based sizing rules for a coherent risk framework. A higher-timeframe trend filter helps you avoid trailing stops in markets that are merely ranging. The recurring pattern is that the Chandelier Exit is the exit half of a system: something else decides direction and entry, and the Chandelier decides, in a volatility-aware way, when the trend has turned enough to leave.
Where it fails
In choppy, non-trending markets the Chandelier Exit is repeatedly triggered as price oscillates through the trailing line, producing whipsaw exits and missed re-entries. Its default 3x ATR width can also give back a large slice of open profit on a sharp reversal, since it waits for a full volatility-scaled move before exiting. A single volatile bar can spike ATR and momentarily loosen the cushion, and gaps can jump price past the line so the actual exit is worse than the plotted level. It is only as good as the trend it is trailing, so using it without a trend filter invites death by a thousand stops. The fixes are to apply it only in confirmed trends, to tune the multiplier to the instrument's behaviour, and to accept that a trailing stop by design surrenders some of the peak.
A worked example
Suppose you are long a stock that has just reached a 22-day highest high of 150, and the 22-period ATR is 4 points. With the default 3x multiplier, the long Chandelier Exit sits at 150 - (4 x 3) = 150 - 12 = 138, so as long as the stock closes above 138 you stay in. If the stock rallies and a new 22-day high of 160 prints while ATR eases to 3.5, the exit ratchets up to 160 - (3.5 x 3) = 160 - 10.5 = 149.5, locking in far more profit and never dropping back below its prior 138 level. Now if the stock reverses and closes at 148, that is below the 149.5 stop, so the Chandelier Exit fires and you are out: the move exceeded three ATRs off the high, which is LeBeau's threshold for treating the trend as broken rather than merely pausing.