Definition
The Chandelier Exit is a trailing stop whose distance from price depends on volatility. For a long trade, it sits below the highest high of recent bars. For a short trade, it sits above the lowest low. It answers one question: has price moved against the trend by more than this coin normally moves? A close through the line means that condition has been met, not that the trend has ended.
How it works
The indicator takes two inputs: a lookback period, N, and a multiplier. It measures volatility with the Average True Range over the same N bars.
- Long line: the highest high of the last N bars, minus ATR(N) times the multiplier.
- Short line: the lowest low of the last N bars, plus ATR(N) times the multiplier.
ATR averages each bar's true range. True range is the largest of three gaps: high minus low, high minus the previous close, and the previous close minus low. The last two capture moves between bars. Most platforms smooth the average with Wilder's method, a slow moving average that gives each new bar a weight of one in N.
ATR measures the size of moves, not their direction, so it widens in both a sell-off and a rally. Every coin has its own ATR scale, which is why one multiplier gives a wide stop on a jumpy coin and a narrow one on a calm coin.
For a round-number example, suppose the highest high of the last 22 four-hour bars is 100 and ATR(22) is 4. With a multiplier of 3, the long line is 100 minus 12, or 88. If price makes a new high at 104 and ATR stays at 4, the line rises to 92. On the short side, a lowest low of 80 puts the short line at 92.
The raw formula allows the long line to fall when an old high leaves the lookback window or ATR expands. Most chart scripts add a ratchet: the long line can only rise while price stays above it, and the short line can only fall while price stays below it. Because ATR is an average, the line responds to a change in volatility over several bars, not at once.
When a candle closes through the active line, the script switches to the opposite line and usually changes its colour. A flip means price has moved against the trend by more than its normal range. Treat it first as a stop being hit. It can also help confirm a new trade alongside structure and other evidence, but never use it as an entry signal on its own.
Default settings
| Setting | Period (N) | Multiplier | When traders use it |
|---|---|---|---|
| Published default | 22 | 3.0 | The standard definition. 22 bars is about one month of stock-market sessions; on crypto's 24/7 daily chart, it covers a bit over three weeks. |
| Variation: shorter period | 14 | 3.0 | 14 is the standard ATR length, so some traders reuse it here. The line adjusts sooner when volatility changes. |
| Variation: wider multiplier | 22 | 3.5 to 4.0 | Small or newly listed coins, and charts below the 1-hour, where routine noise reaches a 3.0 line. |
The multiplier controls the trade-off. Near 1, the line stays close to price and flips back and forth frequently. At 5 or more, it sits far enough away that a trade gives back a large part of the move before the exit. A tighter line preserves more open profit when it holds, but stops you out more often. A wider line does the reverse. Neither suits every coin.
The 22-bar period comes from the stock market, not crypto research. Treat the default as a starting point. Choose a timeframe whose line has stayed on the right side of price through the current trend's normal pullbacks. This choice is fitted to the past: a setting chosen after a move may not suit the next one. The volatility scanner shows how strongly a coin is moving now, which helps you judge whether the default is too tight.
How it is used in this manual's setups
The Chandelier Exit manages a trade; it does not open one. Every setup here places its first stop using chart structure, as covered in stop-loss placement. Size the position so that the planned loss at that stop is 1-2% of the account, with no more than 3x leverage. Both are this manual's house constraints, choices and not a recommended allocation (see position sizing). Switch to the line once it moves past the first stop in your favour.
- Chandelier Exit trend ride. The line is the main exit. Hold the trade with no fixed target until a candle closes beyond the line on your chosen timeframe.
- Ending diagonal breakdown. After the first target fills, the line is one optional way to trail the rest of the short.
When a higher-timeframe wick crosses the line, check a 1-minute or 5-minute chart before acting. A strong candle closing beyond the line there with little wick is a reason to leave before the higher-timeframe candle closes. This check is the one exception to waiting for the close on your chosen timeframe. A long wick that snaps back is a reason to wait a candle or two. During a parabolic run, some traders switch to shorter timeframes to trail more tightly. This is an advanced move, and the tighter line flips far more often.
Common mistakes
- Treating a flip as an entry on its own. Use it as one reason among several. Skip coins that move sideways, where the line flips on every swing.
- Tightening the multiplier to protect profit. This usually stops you out just before the trend resumes. Take a partial exit instead.
- Exiting on a wick. Wait for a candle close beyond the line on your chosen timeframe. When a higher-timeframe wick crosses it, the lower-timeframe check above is the only reason to leave sooner.
- Using one setting for every coin and market. Check each coin's recent swings and widen the multiplier for more volatile coins.
- Ignoring the stop distance. On a volatile coin, the line can sit 8% or more from price. Reduce the position until the planned loss at the line is within the 1-2% house constraint. Keep leverage low enough that liquidation sits well beyond the line.
- Trusting a setting because it fit the last move. Treat any timeframe or multiplier as unproven until it has handled moves you did not choose it for.
Questions
What are the best Chandelier Exit settings for crypto?
Start with the published default: a 22-bar period and a multiplier of 3 on the 4-hour or daily chart. Widen the multiplier toward 4 for small coins and charts below the 1-hour. No single setting suits every coin.
How is the Chandelier Exit different from Supertrend?
Both trail price by a multiple of ATR. Supertrend measures from the midpoint of each bar's high and low. The Chandelier Exit measures from the highest high or lowest low of the whole lookback, so with the same ATR and multiplier it sits closer to price in a strong trend. The Supertrend page explains it in full.
Should the stop trigger on a wick or a close?
Most traders wait for a candle close beyond the line. Crypto wicks run deep and often reverse within the same candle, so triggering on a wick causes more exits on noise.