Chandelier EXIT Indicator Trading Strategy

What is the Chandelier Exit? The Chandelier Exit (CE) is a powerful volatility-based indicator designed to help traders pinpoint optimal stop loss levels for both long and short positions in the market. Developed by the renowned exit-strategy expert Chuck Le Beau, this tool gained wider recognition thanks to Alexander Elder, who introduced it to the trading world in his 2002 book, *Come into My Trading Room*.

Trading NOTES

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• Use a demo account or a small live account first to practice this trading system

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What makes the Chandelier Exit stand out is its unique approach—much like a chandelier hanging from the ceiling, this indicator moves with the market, hanging above price levels in a way that mirrors the dynamic shifts in volatility.

Its primary purpose is to protect traders from excessive losses while riding trends effectively. Intrigued? Stick around to see how this simple yet effective tool can transform your trading strategies and help you capture more profits with precision.

The chandelier indicator will serve as our guide for the exit strategy. It’s simple: after selling half of our position at the 1.5 ratio, we let the rest ride, with our stop loss now protecting those profits.

We’ll exit the trade once the chandelier indicator changes color. For example, in this case, we would have sold the remainder of our position at the indicator’s signal. Notice how much extra profit we were able to capture by holding on to half of our shares. If we had sold everything at the 1.5 ratio, we would have missed out on a significant upside.

You can also observe that the price surged straight up without a pullback.

This is why I prefer to enter trades immediately, as many breakouts tend to move sharply in one direction without retracing. By using this strategy, we maximize both our profits and our trade efficiency.

We start by identifying a few key points on the chart that serve as strong levels of support and resistance. Once we have these trend lines in place, we patiently wait for a momentum candle to break through the resistance. A candle does break through, but since its body isn’t large enough, we hold off and wait for two additional green candles to confirm the breakout. After seeing the three green candles, we confidently enter the trade.

Next, we place our stop loss just below the resistance line to protect against any sudden reversals. We then set our initial take-profit level at a 1.5 risk-to-reward ratio.

Now, it’s a matter of waiting for the price to reach that target. Once it does, we sell half of our position to lock in some profits. After securing that first portion of the trade, we adjust our stop loss to the previous take-profit mark, effectively safeguarding our gains.

At this point, we activate the chandelier EXIT indicator to guide our next move.

We allow the remaining portion of our trade to continue running, and we only exit when the chandelier indicator signals a trend reversal by changing colors. Once that happens, we sell the remaining half of our shares, capturing additional profits that we would have missed by exiting too early.ze of the text for zone labels.

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