Chandelier Exit ATR Trailing Stops and Direction Changes

Summary

The Chandelier Exit is an ATR-based trailing stop intended to track long and short market states. It calculates a long stop from a recent high less a volatility allowance, and a short stop from a recent low plus that allowance. The stops are constrained by their prior values when price remains on the corresponding side, while a close beyond a prior stop can switch the direction. Labels and state highlighting are visual options.

The document gives default settings of a 22-period ATR and a multiplier of 3, and lists a Binance BTC/USDT futures backtest window from April to May 2022. It provides no performance statistics or comparison, so the settings alone do not establish effectiveness. The source also includes entries on direction changes, but no detailed execution assumptions or slippage treatment. As with other trailing-stop methods, reversals can be late and alternating signals may occur in choppy markets.

Key ideas

• The indicator sets trailing stop levels using recent price extremes adjusted by a multiple of ATR.
• The long and short stop lines update according to the prior stop and the closing price.
• A direction change generates a corresponding buy or sell signal in the supplied strategy logic.
• The published backtest settings identify a BTC/USDT futures period but report no performance results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.