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ATR based stop (chandelier stop)

ATR is a measure of volatility.  It shows you how much a particular stock moves (on average) in a day over a certain period of time (adjusted for gaps).  A trader can use ATR to place a stop-loss on a relevant technical place.  Placing your stop-loss at two or tree ATR reduces the chance of being unnecessarily stopped out due to normal “fluctuations”.

In Chartmill you can add an ATR based stop to your charts by adding a “chandelier exit” to your chart.

ATR Based Stop

Settings:

  • First parameter – (3) =  3 x ATR
  • Second parameter – (50) = look back period
  • Third parameter – (0) =  initial level for the stop. Once the moving stop value becomes higher than the initial stop, it will take over. This parameter is 0 by default and is optional. In the advanced charts the initial value will also be picked from the mouse location when adding the indicator by right-click.

ATR Based Stop on SPY

Example: SPY chart with a chandelier exit of 3x ATR that begins 26-days ago.