Chandelier exit Indicator For MT5
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The Chandelier exit Indicator For MT5 is a volatility indicator which was primarily created to assist traders mainly when it came to effectively trailing their stop losses when in profit as part of their exit strategy. This indicator was developed by professional trader and investor, Chuck LeBeau, a man thought of as an expert in exit strategies. Though it could also be used for other functions, like the name suggests, it is far more beneficial at dealing with exits than anything else.
There is no way 100% sure-fire method regarding the issue of trailing stops in profit as it is not a one size fits all approach, which is why it makes it a very challenging aspect of risk or money management. No matter how powerful a trend is perceived to be or is to become in the future, even the strongest of them do not travel in exactly the same way; they will never repeat themselves the same. One of the hardest parts about finding yourself in a profitable trade is simply that no profit is guaranteed or gets secured whilst simultaneously also having the luxury of potentially securing more.
Different types of trailing stop techniques are never always going to produce the desired results for traders because there will always be regret at exiting too early or too late due to the nature of market flow. There are countless situations where traders exit too early with little profit in a trade that moves much further than they anticipated or exit too late with even less profit or a loss when markets ‘come back crashing’ to their entries.
There are generally two types of trailing stops, manual trailing stops that are adjusted by the trader, and then fixed trailing stops, which can be programmed in the MT5 trading platform. Manual trailing stops are considered more advantageous because they are more flexible to market fluctuations because the human eye is able to better visualise these and give enough room to the market. These come in the form of moving averages, using Fibonacci ratios, channels, to name a few. Fixed trailing stops are too inflexible for the most part because they do not allow enough room for the market to ‘breathe’, though in rare cases where markets are liquid or moving abnormally fast, they can ensure a bigger part of the profits is secured.
The Chandelier exit Indicator For MT5 is a good indicator at attempting to strike a balance between these two and at least provide a more sensible, flexible and overall better approach to trailing stops. Considering the range of markets is critical and this is probably the best way at making the best prediction as to how far markets make impulses and how far markets can pullback.
Using the indicator
The basic premise of the Chandelier exit Indicator For MT5 is the probability is high for some form of a trend pullback when the price of an instrument moves against that trend at least three times of the Average True Indicator (ATR). Traders who understand the ATR will find this to be an extension of some of the principles with the ATR, and will see some similarities with the Parabolic SAR as well.
With the Chandelier exit Indicator For MT5, traders can either decide to use the default parameters of the indicator which uses an ATR period of 22 days, or through their own trial and approach methods, adjust the period accordingly. However, 22 days is probably a lot more flexible as it covers a broad enough range that gives enough room to consider the depth at which a market can retrace in a trend since there are 22 trading days in a month.
Using this indicator for the purpose of trailing stops is very simple. Traders would be looking at the dots from the chandelier-like lines as reference points where they may consider to trailing their stops in profit. The screenshot below shows a basic example of this.
In this rough example, assuming one entered at the 75.651 mark, the points marked 1 and 2 next to the dots are obvious places where one may consider placing the stop depending on how much of a correction they are able to withstand in this potential reversal situation. If the market were to continue trending downwards, the indicator would create more dots within this movement that the trader can keep constantly referring to and where they ask questions of possible areas where the market could correct back towards. These lines and dots could also be viewed as support and resistance points. Therefore, traders can pretty much kill two birds with one stone here within this indicator.
The only slight drawback of this indicator is that, like nearly all indicators, it would be very difficult to navigate in a range-bound market. Therefore, proper trend identification is key, though with the Chandelier exit Indicator For MT5, its intention is very clear - to provide as robust a framework for trailing stops as possible.
It can certainly be used as a standalone tool purely for trailing stops only. The indicator can help the trader at best trailing their stop whereby it makes sense given the surrounding market dynamics. In a strong, liquid market, traders can opt to trail closer to the price in attempt to secure a large chunk of the profits, though at the detriment of forfeiting a possibly bigger push. Other traders, regardless of whether the market is moving with force or not, can opt to use a consistent approach of always giving the market a lot of ‘room to breathe’. The detriment of this is it secures a significant smaller portion of the profits. Some traders could attempt to find the best balance between the two.
Exit strategies tend to be overlooked by traders as much of the focus is geared towards the entry, even though the exit strategy can ultimately either make or break the trader. Even with this indicator, one should also always be observing the story the market and what it’s telling them to effectively use it. Happy trading and trailing!