Forex traders often use technical analysis to determine the best entry and exit points for their trades. One popular method for setting stop-loss orders is the Chandelier Exit, which is a trailing stop-loss order that is designed to protect profits while allowing for potential gains. In this article, we will explain how to calculate the Chandelier Exit in Excel.
What is the Chandelier Exit?
The Chandelier Exit is a technical indicator that was developed by Chuck LeBeau. It is a trailing stop-loss order that is based on volatility. The Chandelier Exit is designed to follow the price movement of an asset, while also allowing for a certain degree of volatility.
The Chandelier Exit is calculated using the Average True Range (ATR) indicator. The ATR measures the volatility of an asset over a certain period of time. The Chandelier Exit is calculated by subtracting a multiple of the ATR from the highest high of the asset. This value is then used as the trailing stop-loss order.
How to Calculate the Chandelier Exit in Excel
To calculate the Chandelier Exit in Excel, follow these steps:
Step 1: Calculate the ATR
The first step is to calculate the ATR for the asset you are trading. The ATR is calculated by taking the average of the True Range over a certain period of time. The True Range is the greatest of the following three values:
• The difference between the current high and the current low
• The difference between the previous close and the current high
• The difference between the previous close and the current low
To calculate the ATR in Excel, you can use the AVERAGE and MAX functions. Here is an example of how to calculate the ATR for a 14-day period:
= AVERAGE(MAX(H2-L2,ABS(H2-K1),ABS(L2-K1)),MAX(I2-M2,ABS(I2-K1),ABS(M2-K1)),MAX(N2-J2,ABS(N2-K1),ABS(J2-K1)),MAX(O2-K2,ABS(O2-K1),ABS(K2-K1)),MAX(P2-L3,ABS(P2-K1),ABS(L3-K1)),MAX(Q2-M3,ABS(Q2-K1),ABS(M3-K1)),MAX(R2-J3,ABS(R2-K1),ABS(J3-K1)),MAX(S2-K3,ABS(S2-K1),ABS(K3-K1)),MAX(T2-L4,ABS(T2-K1),ABS(L4-K1)),MAX(U2-M4,ABS(U2-K1),ABS(M4-K1)),MAX(V2-J4,ABS(V2-K1),ABS(J4-K1)),MAX(W2-K4,ABS(W2-K1),ABS(K4-K1)),MAX(X2-L5,ABS(X2-K1),ABS(L5-K1)),MAX(Y2-M5,ABS(Y2-K1),ABS(M5-K1)))
Step 2: Determine the Highest High
The next step is to determine the highest high of the asset. This can be done by using the MAX function in Excel. Here is an example of how to determine the highest high for a 14-day period:
=MAX(H2: H15)
Step 3: Calculate the Chandelier Exit
The final step is to calculate the Chandelier Exit. This is done by subtracting a multiple of the ATR from the highest high of the asset. The multiple used is typically 3, but it can be adjusted based on the trader’s preference. Here is an example of how to calculate the Chandelier Exit for a 14-day period with a multiple of 3:
=J2-3*P2
Conclusion
The Chandelier Exit is a powerful tool that can help Forex traders protect their profits while allowing for potential gains. It is a trailing stop-loss order that is based on volatility, and it is calculated using the Average True Range (ATR) indicator. By following the steps outlined in this article, Forex traders can easily calculate the Chandelier Exit in Excel and use it to set their stop-loss orders.
