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Trend following
Does a chandelier exit count as a trading method on its own?
Chandelier trend following · Chandelier exit trend
What it bets
A trend trade should hang its stop a stretch of volatility beyond the extreme, so the winner can keep going, and a trade that falls back into the volatility band leaves first.
How the rule is written
Chuck LeBeau's chandelier exit: the stop on a long is the highest price since the position began, minus a multiple of ATR. The stop on a short is the lowest price plus a multiple of ATR. It only says how to get out. As a trading method, the entry has to be written separately, for example a new high or a trend filter. A chandelier with no entry rule cannot be backtested.
When it fails
Too small an ATR multiple, and a normal pullback shakes out the trend trade. Too large a multiple, and the profit is given back.
Do not confuse it with
Turtles use the entry price plus or minus several N as the initial protection, then exit on a shorter new low. The chandelier is anchored to the extreme while the position is open, not to the entry price.