# Chandelier Stop A Trend concept (Trend-following systems) in the LuxAlgo Library, with 2 indicator implementations. ## What is a Chandelier Stop? The chandelier stop, usually called the chandelier exit, is a volatility-scaled trailing stop developed by Chuck LeBeau and popularized by Alexander Elder. For a long position it hangs from the highest high of the lookback: the stop is that high minus a multiple of the Average True Range (ATR); shorts mirror it from the lowest low plus the multiple. A common parameterization uses a 22-bar extreme and 3 ATRs. The name comes from the stop hanging from the price ceiling like a chandelier. Anchoring to the extreme rather than the close is the distinctive design choice: the stop advances whenever the trend prints a new extreme and gives ground mainly when volatility expands (or when the anchoring extreme ages out of the lookback window). In the raw formula, a rising ATR without a new high lowers a long stop; many implementations therefore add a ratchet so the stop can only tighten. The two behaviors differ meaningfully in volatile pullbacks, so know which one you are running. LeBeau, co-author of Computer Analysis of the Futures Market and a specialist in exit design, introduced the chandelier exit through his System Traders Club bulletins in the late 1990s. Alexander Elder then featured it, with credit, in Come Into My Trading Room (2002), which carried it to a wide audience. LeBeau's argument: traders overinvest in entries while exits decide outcomes, and a good trailing stop should anchor to the trade's best point and scale by current volatility, tolerating quiet and volatile markets alike without re-tuning. In practice the chandelier competes with structure-based exits, such as stops beneath swing lows or a broken [trendline](https://www.luxalgo.com/library/concept/trendline/), and with average-based ones like a close below an [EMA](https://www.luxalgo.com/library/concept/ema/). Its edge is that the distance is explicit and volatility-denominated; its cost is indifference to structure: it will happily sit mid-range where structure traders see nothing. It is an exit overlay rather than a complete system: entries typically come from a [breakout](https://www.luxalgo.com/library/concept/breakout/), a crossover, or a pattern, and double-sided versions that flip at each breach double as a [reversal](https://www.luxalgo.com/library/concept/reversal/)-style regime line. ## How to identify the chandelier stop on a chart Plotted, the chandelier exit is a stepped line trailing beneath price in uptrends and above it in downtrends. 1. Apply the indicator with its common defaults and confirm which side of price the active line is on. 2. Find the anchor: the line sits one ATR multiple below the highest high of the lookback (above the lowest low for shorts), so each new extreme steps it forward. 3. Treat a close through the line as the event most implementations signal on; double-sided versions flip the plot to the other side of price there. ## How it's calculated The Chandelier stop trails a long position a multiple of ATR below the recent highest high, and a short position the same distance above the recent lowest low. ``` TR_t = max(H_t - L_t, abs(H_t - C_{t-1}), abs(L_t - C_{t-1})) ATR_t = (ATR_{t-1} × (n - 1) + TR_t) / n LongStop_t = HH_n - k × ATR_t ShortStop_t = LL_n + k × ATR_t H_t: high of bar t L_t: low of bar t C_{t-1}: close of the prior bar t: bar index TR_t: true range of bar t ATR_t: average true range with Wilder smoothing (ATR_{t-1} is the prior value) HH_n: highest high of the last n bars LL_n: lowest low of the last n bars n: lookback for both the extreme and the ATR (default 22) k: ATR multiplier (default 3) LongStop_t: trailing stop for longs at bar t ShortStop_t: trailing stop for shorts at bar t ``` Chuck LeBeau's original hangs the stop from the highest high (or highest close) since trade entry; the fixed 22-bar lookback is the common charting adaptation. Many implementations add a ratchet so the long stop never falls and the short stop never rises while the position is open. ## How traders use it - As the exit leg of trend-following systems: the ATR cushion is sized to tolerate ordinary noise while forcing an exit once price gives back a volatility-scaled chunk from the peak; wider multiples exit later, tighter ones get shaken out more often. - As a continuous bias line: plotted on both sides and flipped on breach, it acts as a volatility-based [trend regime label](https://www.luxalgo.com/library/concept/trend-regime-label/), with price above the long stop read as an intact uptrend. - As the sizing input: because the initial stop is expressed in ATRs, risk per unit is known up front and slots directly into ATR-denominated position sizing. - Gated by a trend filter: pairing the exit with an [MA slope filter](https://www.luxalgo.com/library/concept/ma-slope-filter/) or a [moving-average crossover](https://www.luxalgo.com/library/concept/moving-average-crossovers/) regime keeps flip-style versions from churning in flat markets, as some published variants do. ## Chandelier Stop vs other trailing methods - **Supertrend** (https://www.luxalgo.com/library/concept/supertrend/): Supertrend also offsets by an ATR multiple, but from the bar midpoint rather than the extreme, with band logic and a built-in ratchet that flips a plotted regime line. The chandelier tracks trend extremes directly and is usually framed as an exit rather than a signal plot. - **Dynamic S/R Via MA** (https://www.luxalgo.com/library/concept/dynamic-s-r-via-ma/): Using a moving average as trailing support means the exit distance is whatever gap exists between price and the average, and it shrinks as trends stall. The chandelier's cushion is explicit, peak-anchored, and volatility-scaled, so it does not tighten just because price paused. - **MA Envelope** (https://www.luxalgo.com/library/concept/ma-envelope/): An envelope offsets a moving average by a fixed percentage, so its width ignores volatility changes and its center lags price. The chandelier anchors to the extreme itself and lets ATR set the width, adapting to regime shifts a fixed percentage cannot. ## FAQ ### What are the standard chandelier exit settings? The most-cited defaults are a 22-period highest high (lowest low for shorts) and a 3.0 multiple of 22-period ATR. None of this is sacred: a larger multiple tolerates deeper pullbacks and exits later, a smaller one exits earlier but is shaken out more often, and intraday traders commonly shorten the lookback. ### Can the chandelier stop move against your position? In the raw formula, yes. The stop is the extreme minus a multiple of ATR, so an ATR expansion without a new extreme lowers a long stop. Many implementations ratchet the stop so it never loosens. Both versions exist in the wild and behave very differently in volatile pullbacks, so verify which one you are running: watch a volatile pullback and see whether the long line holds or slips lower. ### Who invented the chandelier exit? Chuck LeBeau, co-author of Computer Analysis of the Futures Market, developed it and shared it through his System Traders Club bulletins in the late 1990s. Alexander Elder's Come Into My Trading Room (2002) presented it with credit to LeBeau and made it widely known. ### Can the chandelier exit be used for entries? It was designed purely as an exit, and LeBeau framed it that way. Double-sided implementations that flip at each breach become stop-and-reverse lines, and some traders take the flip as an entry cue much as [Supertrend](https://www.luxalgo.com/library/concept/supertrend/) is used. Most practitioners keep separate entry logic and let the chandelier manage the trade. ### How does the chandelier exit differ from a Wilder-style volatility stop? The classic volatility stop trails an ATR multiple from the most favorable close, while the chandelier trails from the most favorable extreme. Because the highest high sits at or above the highest close, a chandelier with the same multiplier rides closer to price for longs and tends to exit somewhat earlier. ### How does the chandelier exit compare with Parabolic SAR? Parabolic SAR trails price via an acceleration factor that tightens with time and each new extreme, regardless of volatility. The chandelier's distance is pure volatility: it never tightens simply because a trend has aged, only when ATR contracts. ### What markets and timeframes suit the chandelier exit? It is common wherever ATR is meaningful: futures, forex, crypto, and swing-trading stocks, with intraday users shortening the lookback and position traders lengthening it. Instruments that gap hard can jump any trailing stop, though, so the line is an instruction to exit, not an assurance of the fill price. ## Implementations in the Library - Chandelier Exit Oscillator (LuxAlgo): https://www.luxalgo.com/library/indicator/chandelier-exit-oscillator/ - Chandelier Exit (LuxAlgo, the standard build of the classic formula): https://www.luxalgo.com/library/indicator/chandelier-exit/ ## Related concepts - Supertrend: https://www.luxalgo.com/library/concept/supertrend/ - Parabolic SAR: https://www.luxalgo.com/library/concept/parabolic-sar/ - Donchian Trend Rules: https://www.luxalgo.com/library/concept/donchian-trend-rules/ - ATR Trailing Regime: https://www.luxalgo.com/library/concept/atr-trailing-regime/ - Gann HiLo Activator: https://www.luxalgo.com/library/concept/gann-hilo-activator/ - Alligator: https://www.luxalgo.com/library/concept/alligator/ - NRTR: https://www.luxalgo.com/library/concept/nrtr/ - Chande Kroll Stop: https://www.luxalgo.com/library/concept/chande-kroll-stop/ - Halftrend: https://www.luxalgo.com/library/concept/halftrend/ - Trend Magic: https://www.luxalgo.com/library/concept/trend-magic/ --- Source: https://www.luxalgo.com/library/concept/chandelier-stop/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/