Camarilla Pivot PointCamarilla pivot point is an extension of the classic pivot point, which provides traders with key support and resistance levels.
The Camarilla reversal includes four support levels and four resistance levels, as well as significantly closer levels than in other reversal options. This proximity makes Camarilla ideal for short-term traders.
Camarilla is a special tool for analyzing price actions. The indicator functions on the basis of mathematics and reproduces possible intraday support or resistance levels. Following the example of classic pivot points, the Camarilla interacts with the high price indicators of the previous day, low prices and the closing price. The camarilla is a set of eight levels that display the value of support or resistance for the trend movement being analyzed.
C = Closing of the previous day. H = The maximum of the previous day.
L = Minimum of the previous day.
R4 = (H – L) x 1,1 / 2 + C
R3 = (H – L) x 1,1 / 4 + C
R2 = (H – L) x 1,1 / 6 + C
R1 = (H – L) x 1,1 / 12 + C
S1 = C – (H – L) x 1,1 / 12
S2 = C – (H – L) x 1,1 / 6
S3 = C – (H – L) x 1,1 / 4
S4 = C – (H – L) x 1,1 / 2
You need to pay attention to the S3, S4 and R3 levels, R4. R3 and S3 are the levels for moving against the trend with a stop loss* placed near R4 or S4. S4 and R4 are the breakout levels.
In the case when these levels are passed, it's time to sell in the direction of the trend.
How to use CamarillaCamarilla pivot Point trading gives you the opportunity to plan your trades in advance.
Here are some reasons to consider using the Camarilla pivot points indicator:
Identify reliable support and resistance levels. Generates accurate buy and sell signals. It shows bullish and bearish price zones of the day. For reversal trading, the key levels to watch are S3 and R3. These are the levels that signal potential reversals when approaching.
Therefore, when the price indicator approaches and tests the S3 level below the buffer zone, an upward reversal is quite possible on the horizon. In other words, a reversal from a bearish trend to a bullish trend on this timeframe. Similarly, when the price approaches and tests the R3 level above the buffer zone, a reversal is possible when the bullish price movement is replaced by a bearish one. In both cases, the next level indicates the level for the stop loss.
For a reversal from the S3 level above, the stop loss can be set at the S4 level, and for a reversal from the R3 level, the stop loss can be set at the R4 level – provided that these levels comply with your risk and capital management rules.
Trading on breakthroughsFor breakout trading, the key levels are R4 above the buffer zone and S4 below.
These are the levels at which the price is expected to exit the current region and begin a strong movement away from the region. Thus, any movement aimed at testing and breaking the R4 level is likely to lead to continued price growth and the development of a strong trend. Equally, if the S4 level is tested, the price is likely to continue to decline and develop a strong trend.
Using Camarilla levels in this way offers a comprehensive solution for two different approaches to trading and, in addition, also provides potential target levels along with the proposed stop losses, but, as always, they must comply with your risk and capital management rules.