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Chandelier exit

A trailing stop placed a multiple of ATR below the highest high reached since entry, ratcheting up but never down.

A trailing stop held two ATRs under a rising priceA rising price line with a stepped line below it that climbs whenever price climbs and holds its level whenever price falls, until price drops onto it.PRICE AND A TRAILING ATR STOP2 × ATRstop hittrailing stoppriceIllustrative prices. The stop follows price up and never moves back down.
A trailing stop set by ATR. Average true range measures how far a market typically travels in a session, so a stop placed a multiple of ATR under price leaves room for ordinary swings. The step line only ever ratchets up, and the circle marks where price falls onto it.

Chuck LeBeau's rule sets the stop at, for example, the highest high since entry minus three times the 22 period atr. As new highs are made the stop rises; when volatility expands the stop sits further away, which prevents being shaken out by normal noise.

The design solves a real problem: fixed percentage trailing stops are too tight in volatile markets and too loose in quiet ones, while an ATR-based stop adapts automatically.

The trade-off is unavoidable. A wide multiple keeps you in trends but gives back a lot at the end; a narrow multiple exits closer to the high but gets stopped out mid-trend. There is no setting that does both, and choosing the multiple from historical results invites overfitting.

Related: atr, atr-stop, trailing-stop, trend-following, overfitting

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