| Do you know how to manage trades in order to | | | | As you can see, true range is a volatility based |
| maximize profits? Do you have a system that will let | | | | formula that reflects an entire days price moving, |
| profits run as markets begin to soar? How DO you | | | | including all data since the previous days close. By |
| manage your profitable trades? | | | | including this data, true range is able to measure gaps |
| One of the most difficult skills for novice traders to | | | | in its measure of volatility. |
| master is the art of profit taking. Ask yourself this | | | | The ATR value indicates how much up or down a |
| question: Have you ever sold out of a position, only | | | | stock has moved, on average, over the defined |
| to find the stock has gone up drastically right after | | | | period. High values indicate that prices are changing a |
| you sold it? | | | | large amount during the day, hence high volatility. |
| Don't fret, as this happens to every trader. The best | | | | Low values indicate that prices are staying relatively |
| you can do is to try and find a way to manage your | | | | constant, hence low volatility. |
| trades, take enough profits to ensure you don't take | | | | The Chandelier stop applies a multipe of Average |
| a loss, and then learn how to let profits run! | | | | True Range to "hang" a trailing stop from the highest |
| Of course, there exists no perfect method for profit | | | | high achieved since opening the trade for bullish |
| taking. Therefore, as active traders, it is necessary | | | | stocks, and from the lowest low of the trade for |
| to construct a consistent and repeatable profit taking | | | | bearish stocks. |
| plan. It is perfectly acceptable to have multiple price | | | | As you can see, the Chandelier Stop moves as price |
| targets, as well as several different technical and | | | | moves, and adjusts based on the stocks volatility. |
| time based methods of selling stocks to maximize | | | | This can help a trader let profits run, helping them to |
| your profits. | | | | sell stocks more profitably. |
| You can use targets based percentage gains, | | | | Le Beau recommends setting profit taking rules |
| indicators, price patterns, moving averages, and | | | | around the multiplier used in setting the Chandelier |
| myriad other tools. However, there exists a method | | | | Stop. Upon opening the trade, he recommends |
| that is based on the actual volatility of the market | | | | setting the Chandelier stop 3 to 3.5 ATR away from |
| you are trading that is systematic and easy to follow: | | | | the price at which the trade was opened.As profits |
| Introducing the Chandelier Stop. | | | | increase, Le Beau suggests tightening the Chandelier |
| The Chandelier Stop was invented by professional | | | | Stop. Upon achieving 3 ATR of profit, he |
| Trader Charles Le Beau, and is a volatility based | | | | recommends tightening the Chandelier Stop to 2 |
| trailing stop method that uses Average True Range | | | | times ATR. Traders should also consider setting levels |
| at its core. | | | | and rules for closing out part of their position in order |
| Average True Range was developed by Welles | | | | to protect profits. |
| Wilder order to measure a stocks volatility. ATR | | | | By consistently implementing the Chandlier Stop |
| (acronym for Average True Range) is a a 14 day | | | | trailing stop method, you will be able to sell stocks |
| simple moving average of true range. True range is | | | | more profitably. It will enable you to protect profits, |
| simply the greatest of the following: | | | | prevent losses on an otherwise winning trade, and |
| * The current High less the current Low. | | | | force you to let profits run on at least some portion |
| * The absolute value of the current High less the | | | | of the original trade. You will be able to set the ATR |
| previous Close. | | | | multiplier to a range that comfortably fits your trading |
| * The absolute value of the current Low less the | | | | style, as well as risk tolerance. |
| previous Close. | | | | |