Chandelier Stop

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, and with average-based ones like a close below an 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, a crossover, or a pattern, and double-sided versions that flip at each breach double as a 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. 1Apply the indicator with its common defaults and confirm which side of price the active line is on.
2. 2Find 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. 3Treat 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.

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, 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 or a moving-average crossover regime keeps flip-style versions from churning in flat markets, as some published variants do.

Chandelier Stop vs other trailing methods