Chandelier exit in gold trading

The chandelier exit is an ATR-based trailing stop popularized by Chuck LeBeau. For a long position the stop sits at the highest high of the last N bars minus a multiple of ATR, typically 22 bars and 3 × ATR(22). It “hangs” from the high like a chandelier from a ceiling.

How it applies to gold trading

It differs from a basic ATR trail in its anchor: it measures from the highest high rather than the highest close, so long upper wicks pull the stop up. On gold, where news wicks are common, this can tighten the stop suddenly after a spike. Some traders prefer closes for that reason; others like that the exit reacts to exhaustion wicks.

The default 22-bar, 3 × ATR settings were designed for daily charts and trend-following. On intraday gold charts many traders shorten the lookback or the multiple to fit the session.

Worked example

Example (hypothetical numbers): on the daily chart, the highest high of the last 22 days is 4,120 and ATR(22) is $40. The chandelier stop for a long is 4,120 − 3 × 40 = 4,000. If gold makes a new high at 4,150, the stop rises to 4,030, provided ATR is unchanged.

Like any trailing stop, it only moves in the trade’s favor. If ATR expands sharply, the calculated level can fall, but the stop stays where it was.

A common mistake

Copying the daily default onto a 5-minute chart, where 3 × ATR may be far too wide for the trade’s original risk.

See also: ATR trailing stop, ATR, Trailing stop, Trend following.

Frequently asked questions