Chandelier Exit Indicator Guide
Chandelier exit indicator (CE) MT4 is an extremely popular MetaTrader indicator used by traders to determine the points where they should either enter or exit the market. This technical tool permits traders to keep their trades until there is a concrete trend reversal occurrence. 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 forex. Hence, to avoid early profitable trade exits. In this course, we will deep dive into the Tradingview chandelier exit indicator.
Chandelier Exit FAQ
What is Chandelier Exit ?
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 MT5 chandelier exit indicator is based on the ATR-volatility tool. Consequently, the chandelier exit indicator is a combination of two ATRs, one with the highest price and the other with the lowest price, along with some modifications in the calculation. Note that this true range is a volatility tool that displays how much on average, the prices of a certain asset are moving during a predetermined period.
Is it a good indicator?
The chandelier ext is a good indicator for stops in the forex market. To explain, the indicator incorporates the average true range into its formula to establish a connection between volatility and stop loss levels. Consequently, forex traders employ the Chandelier Exit strategy as a stop-loss finder, a trailing stop-loss provider, and as a manner to rescue their funds from huge losses that may result from trend reverses. That is why the majority of skilled traders suggest employing the Chandelier Exit strategy as a stop loss instrument rather than a trading signals provider. Besides, most professional traders assume that chandelier exit MT4 indicator have a very high success rate, especially in FX trading.
What is the formula for chandelier exit ?
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.
Note that:
- 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 do you trade with 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”.
Chandelier uptrend
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 may indicate a potential downside move. Thus, short position traders should sell the asset now and wait for price declines.
In the following graph, we can observe that the highest price of the breakout candle has touched the chandelier exit short line of the indicator, indicating a potential uptrend reversal. Bears should lock in a profit before the prices rise higher. In the same manner, the price went above the chandelier exit short line. Which indicates that the price will rise again. Long position traders are advised to buy the security now and wait for the right time to sell it back at a more expensive price.
Chandelier downtrend
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 breakout candle has touched the chandelier exit long line, indicating a potential downtrend reversal. Bulls should lock in a profit before the prices fall lower. In the same way, the price went below the chandelier exit long 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 indicator
Pros:
- 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.
Cons:
- It could lead to misinterpretations, if not used over 22 days (recommended look back period for chandelier exit).
- 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 in the MetaTrader 5 terminal.
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.
Conclusion
The tradingview chandelier exit is an extremely powerful forex Indicator. 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.
Key takeaways
- 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”.
