How Does the Chandelier Exit (22,4,High) Stop-Loss Work?
The Chandelier Exit is a trailing stop-loss that moves with the trend. It's calculated as the highest high of the last 22 days minus 4 times the Average True Range (ATR). As prices rise, the stop rises too, locking in gains. If price falls below this level, it signals an exit.
1How It Works
- •Find the highest high over the past 22 trading days.
- •Calculate the 22-day Average True Range (ATR), which measures daily price volatility.
- •Subtract 4 × ATR from the highest high to get the stop level.
- •The stop only moves up, never down—it "trails" the price higher.
- •When the closing price falls below the stop, it triggers an exit signal.
- •The stop updates daily after market close.
2Example
Chandelier Exit Calculation for TQQQ
Given data:
• Highest High (22 days): $48.00
• Average True Range (22 days): $1.25
• Multiplier: 4
Calculation:
Chandelier Exit = Highest High - (Multiplier × ATR)
Chandelier Exit = $48.00 - (4 × $1.25)
Chandelier Exit = $48.00 - $5.00
Chandelier Exit = $43.00
Interpretation:
• Current TQQQ price: $46.50
• Stop level: $43.00
• The position is safe—price is above the stop
• If TQQQ closes below $43.00, exit the position
As TQQQ makes new highs, the stop will rise accordingly.
3Common Questions
Why 22 days and 4x multiplier?
These are common parameters that balance responsiveness with avoiding premature exits. 22 days is roughly one trading month. 4x ATR provides room for normal volatility in leveraged ETFs.
Does the stop ever move down?
No. The Chandelier Exit only moves up with new highs. It never decreases, which is why it's called a "trailing" stop—it follows price upward.
Should I set an actual stop-loss order at this price?
That's a personal choice. Some traders set hard stops with their broker; others monitor daily and exit manually. The system shows you the level; you decide how to execute.
How is this different for Short ETF positions?
For inverse ETFs (like SQQQ), since you're buying the inverse, the calculation still uses the Long formula. When you buy SQQQ, you profit when the underlying falls, but you're going "long" SQQQ itself.
What is ATR?
Average True Range measures the average daily price movement, accounting for gaps. Higher ATR means more volatile; lower ATR means calmer. It helps set stops that respect the asset's normal behavior.
Technical Notes
- —ATR is calculated using Wilder's smoothing method over 22 periods.
- —True Range = max(High-Low, |High-PrevClose|, |Low-PrevClose|).
- —Stop levels are computed on the Long or Short ETF price, not the Core ETF.
- —This implementation uses the "Long" Chandelier formula for all positions since you are buying the ETF.