Chandelier Exit Indicator Guideline
Chandelier exit indicator (CEI) MT4 is an extremely popular tool used by traders to determine the points where they should either enter or exit the market. The chandelier exit indicator for MT5 is a volatility-based indicator that alerts users on when they should put a stop-loss order to realize the highest possible profit. In this course, we’ll deep dive into the chandelier exit indicator Tradingview.
Chandelier Exit Indicator
What is chandelier exit indicator ?
Chandelier exit (CE) is one of the most efficient tools that allow traders to detect when they should enter or exit the market. It was created by Charles Le Beau. Due to the indicator flexibility, it can work efficiently on any financial asset and on any time frame, but preferably over a daily time frame (we’ll understand why in the next section). In addition, the chandelier exit indicator is based on the Average True Range (ATR) indicator. Consequently, the CE indicator is a combination of ATR, one with the highest price and the other with the lowest price, along with some modifications in the calculation.
The Average True Range (ATR) indicator is also a volatility indicator that displays how much on average, the prices of a certain asset are moving during a predetermined period.
Chandelier exit indicator formula
The Chandelier exit (CE) indicator shows 2 lines, one called “The Chandelier exit long line” and the other called “The Chandelier exit short line”. However, the Chandelier long line is used essentially to close a long position whereas the Chandelier short line is for exiting a short position.
- A long Position: The trader has bought the asset and is keeping it to realize a profit from a price increase.
- A short Position: The trader has borrowed the asset from another party and has sold it for a high price, then he will buy it back as soon as the price falls deeply, realizing a profit from the spread over the Sell/Buy price.
The Calculation of the CE indicator based fundamentally on the ATR indicator. The recommended time frame is a 22 days interval, where the CE indicator adds the ATR indicator results for the Lowest line and subtracts the ATR indicator results for the Highest line.
As a result, we can get the Following 2 Formulas:
How to use chandelier exit indicator ?
The Chandelier exit indicator was created with the main goal of detecting a potential trend reversal and alerting users immediately. Charles Le Beau advises users to use a 22 days chart for the indicator, the reason behind this is really simple: there are 22 trading days in a month. In other words, the indicator works in a 1-month time frame. The judging rule is also very simple:
- Close the long position directly when the Price goes below “the chandelier exit long line”.
- Close the short position directly when the Price goes above “the chandelier exit short line”.
An uptrend is a period of rising prices, it could be a short-term phase or a long-term phase, depending on the asset and the overall market in general. In the majority of cases, an uptrend will be followed by a downtrend and rarely by a sideways trend. In the chart below, we can observe that the tail of the candle (lowest) has touched the Chandelier exit long line, which indicates a potential downtrend. However, we can observe also the price when above the Chandelier exits the short line, which indicates a potential downtrend. Thus, short position traders should sell the asset now and wait for price declines.
A downtrend is a period of falling prices, it could last minutes, hours, days, weeks, or even months, etc. Similarly, a downtrend could be followed by an uptrend or a sideways trend. In the following chart, we can observe that the lowest price of the candle has touched the chandelier exit long line, indicating a potential downtrend, long position traders should lock in a profit before the prices fall. In the same way, the price went above the chandelier exit short line, which indicates that the price will fall again. Short position traders are advised to sell the security now and wait for the right moment to buy it back cheaper.
Pros and cons of the chandelier exit indicator
- Easy to use and understand.
- Ideal for new inexperienced traders.
- Flexible: Works on every financial asset from stocks to any commodity.
- Available on popular trading platforms: MetaTrader 4, MetaTrader 5, and Tradingview.
- Could lead to misinterpretations, if not used in a 22 days timeframe.
- Could only be used with “Japanese candlesticks” or “Heikin Ashi”.
- Results could be manipulated if someone makes a false/fake trade.
Download Chandelier exit indicator for MT4
Chandelier exit indicator MT4 is a custom indicator that you can add to MetaTrader 4 platform. As follows, the Price went below the “chandelier exit long line”, which alerts users of a potential downtrend. In this case, the long position traders must sell before the price makes a sharp leap. However, the Price went later above the “chandelier exit short line”, therefore alerting users of the potential continuation pattern. In this case, the short position traders should sell the asset now and stand still, waiting for the price decrease.
Download Chandelier exit indicator for MT5
Chandelier exit indicator MT5 is a free download indicator that assists traders to identify entry and exit points. As observed below, the price went below the “chandelier exit long line”, alerting users of the potential downtrend. Long position traders must sell the asset as soon as possible to avoid catastrophic losses.
Download Chandelier exit indicator for Tradingview
The chandelier exit indicator is available for Tradingview. As observed, the indicator alerts users of short and long positions on when they should exit or enter the market. A so volatile asset: that the chances of entering the market are fewer that the chances of leaving the market.
The chandelier exit indicator is an extremely powerful tool. The indicator alerts users of a potential trend reversal, in other words, it can tell when you should enter or exit the market effortlessly. It works on every financial instrument and on any time frame, but preferably over a 22 days time frame.
- The indicator based on 2 lines: One called the “Chandelier Exit Long Position”. And the other called “Chandelier Exit Short Position”.
- Constructed by combining 2 Average True Range (ATR) indicators.
- The decision rule is as follows:
Exit the market with a long position directly when the Price goes below “the chandelier exit long line”.
Exit the market with the short position directly when the Price goes above “the chandelier exit short line”.