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Much has been posted about the Chandelier Exit....and very few
specifics. I know several posts have asked for information and little or
none has been posted....usually this is not the case. I came upon this
information below this evening and would like to pass it on to whom ever
is interested and is working on the Exit.
"THE CHANDELIER EXIT: We have often advocated the importance of good
exits
and
this is one of our favourites. The exit stop is placed at a multiple of
average
true ranges from the highest high or highest close since the entry of
the
trade. As the highs get higher the stop moves up but it never moves
downward.
(For future reference please note that we almost always give our
examples
from
the long side and if there are any difference on the short trades we
will
try
to point them out.)
Example of Chandelier Exit:
Exit at the highest high since entry minus 3 ATRs on a stop.
Or exit at the highest close since entry minus 2.5 ATRs on a stop.
Application: We like the Chandelier Exit as one of our primary exits for
trend
following systems. (The name is derived from the fact that the exit is
hung
downward from the ceiling of a trade.) This exit is extremely effective
at
letting profits run in the direction of a trend while still offering
some
protection against any reversal in trend. In fact our research and that
of
our
friend Dr. Van Tharp has shown that this exit is so effective that we
can
literally enter markets at random and if we use this exit the results
over
time are likely to be profitable. (If you don't believe us just test it
yourself over a handful of markets.) In general the best values for the
ATR
in
most markets ranges between 2.5 and 4.0.
Coding the Chandelier Exit Several members have inquired about how to
code
the
Chandelier Exit described in the Vol. 1 #2 Club Bulletin. Since I'm not
a
programmer I put out some calls for help. Quoted below is a suggested
solution
for TradeStation users provided to us by my good friend Terence Tan in
Singapore:
MAX TRADE HIGH & MIN TRADE LOW USER FUNCTIONS
1. Create a User Function called " MaxTradeHigh " , with the following
code:
If marketposition <> 1 then MaxTradeHigh = -999999;
If marketposition = 1 and H > MaxTradeHigh[1] then MaxTradeHigh = H;
2. Create a User Function called " MinTradeLow " , with the following
code:
If marketposition <> -1 then MinTradeLow = 999999;
If marketposition = -1 and L < MinTradeLow[1] then MinTradeLow = L;
3. To use the Functions in a program, just reference the User Function
names
directly, e.g. Exitlong MaxTradeHigh -3 * Average (TrueRange,10) stop;
Once you define the User Functions, you never need to duplicate the code
in
any system when you need to code the Chandelier Exit. "
I have checked the Functions in the PowerEditor and they will verfy.
Please do not ask me a lot of questions on this I am not a coder....I am
a better.... code surgeon. Writing on a wet paper lunch bag with a ball
point pen is easier than my code writing.
For some of you who would like a little more control of the Exit.
I would offer the following.
Input:k(3),l(10);
Exitlong (MaxTradeHigh -k * Average(TrueRange,l)) stop;
This will allow you to experiment with different values without having
to go back to the PE.
Let's see if this doesn't put a little zest to this list. It would be
interesting to implant this exit into the code posted by Greg
Woods....now there's a project for someone. I gotta go for supper.
John
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