Chandelier Exit: Hung From the High
The chandelier exit places a trailing stop three average true ranges below the highest high of the last twenty-two bars, so it hangs from the top of the move rather than from the entry price. It is a rules-based exit and it produces no entry signal at all.
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How it works
The chandelier exit hangs a stop below a recent high. For a long position it sits a fixed number of average true ranges beneath the highest high of the lookback window.
The name describes the anchoring. A chandelier hangs from the ceiling and moves up as the ceiling rises; the stop does the same thing from the highest high.
The published defaults are 22 bars and 3 average ranges. Twenty-two is roughly a trading month of daily bars, and three is a deliberately loose multiple. Both are settings, not laws.
The anchoring is the real difference from an ordinary trail. Your entry price is an accident of when you happened to act; the highest high since then is a property of the market, and the exit reads better for it.
What the defaults deliver
Pullbacks arrive often enough to test any trail. The S&P 500 slid 5% or more below its record on 68 separate occasions between 1950 and 2026, close to once a year, so a position held for long will meet one.
Whether each dip reaches a three-range stop depends on the volatility of the moment. Either way, the loose multiple postpones the exit and does not avoid it, which is the honest description of every trailing rule.
The 22-bar window is the parameter that gets ignored. A shorter lookback drops old highs sooner, so the anchor falls faster after a peak and the stop tightens; a longer one keeps a distant high alive and leaves the stop far below price for weeks. Both changes move holding time in the same way the multiple does, which is why changing them together makes any result impossible to attribute.
In practice
Nothing in the calculation looks at volume. A high made on heavy participation and one made on nothing anchor the stop identically.
The lookback is in bars, so its meaning changes with the chart. Twenty-two five-minute bars is under two hours, and the same setting on a daily chart is a month of trading.
A gap below the level fills at the open, and because the chandelier sits far below price by design, the gaps that reach it are the large ones.
It produces no entry signal. Price crossing the line is an exit for a position you already hold and says nothing about opening one.
The loose setting is cheap on turnover. A trail that holds for weeks rather than days means far fewer round trips than a tight one, and each round trip pays the spread and any commission.
The exit price is arithmetic. No participant is defending it, which argues for placing it beyond structure rather than treating it as structure.
Position size is the other half
A three-range stop is a wide stop, and a wide stop with an unchanged position size is a large loss. The distance and the size have to move together, or the looser exit simply converts a series of small losses into a smaller series of much larger ones.
The arithmetic is straightforward: risk per trade divided by stop distance gives position size. With the distance moving as volatility changes, the size changes on every trade — which is the part most people skip, and the part that decides whether a loose exit is an improvement or an expensive habit.
What a chandelier exit is not
It is not an entry system. It only manages a position you have.
It is not fixed risk. The distance moves with volatility.
It is not anchored to you. The market’s high sets the level.
And it is not gap-proof. Nothing resting at a price is.
How this connects
This is a stop-loss that hangs from the high, which is where the name comes from, and it is a very close relative of the ATR trailing stop.
The distance is a volatility multiple. Average true range supplies the unit, so the stop is wide in fast markets and tight in quiet ones without you changing anything.
The anchor is the difference. This measures down from the highest high since entry; an ATR trailing stop typically measures from the current bar.
It only moves one way. As the high advances the stop follows and never retreats, which turns an open trade into a worst case that improves.
And stop-loss placement is the real subject underneath - this is one method of answering it, and the multiple you choose is still a preference.
When it fails
In a range the highest high stops rising, so the stop freezes and the exit behaves like a fixed one — protecting nothing that a static level would not have protected while the position goes nowhere.
The second failure is a lookback longer than the trend. A 22-bar high from three weeks ago keeps the stop absurdly far below current price and gives back most of the move.
A third is tightening the multiple after a bad exit. The setting is fitted to the trade that just finished and shortens every future one.
A fourth is running it without adjusting size. Three average ranges of risk at an unchanged size is a much larger loss than the method intends.
And a fifth is treating 22 and 3 as correct. They are the defaults from one publication, and the survival table is how you check what your own choice buys.
The original data
The S&P 500 is a long record for a loose trail to live with. From 1950 to 2026 it closed at a new record on only about 7% of trading days, so most days were spent below an earlier peak rather than lifting a stop to a new one. The worst stretch tested every exit rule: the index fell 56.8% between 9 October 2007 and 9 March 2009, and a trailing exit is exactly the rule that takes a holder out early in a fall like that — at the price of sitting out the recovery unless there is a rule for getting back in.
The gap between an ordinary holding period and the longest ones is where the method earns its keep. A trend-following exit only works if it occasionally holds through a long move, and those rare long holds are where the profit that pays for all the ordinary exits comes from. Judge a loose exit on that tail rather than on its average — the median is where most trades finish, and the tail is why the rule exists at all.
Related
ATR trailing stop is the general form and the parameter discussion. Trailing stop has the full survival table across six distances. And stop loss placement covers choosing between structure and calculation.
The chandelier is anchored to the market rather than to you. Your entry price is a fact about your day; the highest high since you got in is a fact about the market. Anchoring the exit to the second one removes a lot of arguing with yourself.
— Michael Whitman
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