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Camarilla Pivot Points Formula For Day Trading

April 26, 2014

Camarilla pivot point formula is the refined form of existing classic pivot point formula.  The Camarilla method was developed by Nick Stott who was a very successful bond trader. What makes it better is the use of Fibonacci numbers in calculation of levels.  Below is the quote of famous trader Nick Stott

Everyone asks me that. When I first started trading, I thought (as a lot of people do!) that the markets were controlled by a secret ‘insiders club’ of powerful organizations who manipulated prices for their own benefit. I remember that at the time I was smugly sure that this was so, and was excited to be joining (as I then thought!) this secret ‘cabal’. Of course, as I learned more about the markets, I realized that this was nonsense, and that the markets are far too big to be effectively controlled, even by gigantic financial corporations. However, it still looked to me as though there was a pattern in what was supposed to be the ‘random walk’, a pattern that matched very closely what I imagined a ‘secret society’ would try to implement in order to maximize their revenues. The obvious conclusion, of course is that if you have enough participants, statistically they start to behave in broadly predictable ‘over-ways’, and this leads to the patterning that the equation is so good at predicting. The word ‘Camarilla’ is based on the Latin word for room (camera), and it means basically a small clique of ‘advisers’ who try to manipulate the person in power for their own ends. Frankly, it was just a joke, and I am always surprised at how seriously everyone took it.

Camarilla equations are used to calculate intraday support and resistance levels using the previous days volatility spread. Camarilla equations take previous day’s high, low and close as input and generates 8 levels of intraday support and resistance based on pivot points. There are 4 levels above pivot point and 4 levels below pivot points. The most important levels are L3 L4 and H3 H4.  H3 and L3 are the levels to go against the trend with stop loss around H4 or L4 . While L4 and H4 are considered as breakout levels when these levels are breached its time to trade with the trend.

How to calculate Camarilla Pivot points

To calculate Camarilla Pivot points all you need is previous trading day’s high low and close value.  Below are the equations for calculation various levels.

C = Previous day close

H = Previous day high

L = Previous day low

H4 = [0.55*(H-L)] + C

H3 = [0.275*(H-L)] + C

H2 = [0.183*(H-L)] + C

H1 = [0.0916*(H-L)] + C

L1 = C – [0.0916*(H-L)]

L2 = C – [0.183*(H-L)]

L3 = C – [0.275*(H-L)]

L4 = C – [0.55*(H-L)]

How to use Camarilla Pivot Points in Trading ?

Trading is done on the basis of open price on the next day. Since the market is very volatile in the first 15- 30 minutes of trade and operator action is high, we prefer using weighted average price or the price after 30 minutes as open price.  Depending on the open price there can be different scenarios.

Case 1: Open price is between H3 and L3

Buy when the price move back above L3 after going below L3. Target will be H1, H2, H3 levels. Stop loss can be placed at L4 level

Wait for the price to go above H3 and then when it move back below H3 again sell or go short. Target will be L1,L2 L3 levels and stop loss above H4

Case 2: Open price is between H3 and H4

Buy when the price move back above H3 again after going below H3. Target will be 0.5%, 1% and 1.5% . Stop loss can be placed at H3

Wait for the price to go above L3 and then when it move back below L3 again sell or go short. Target will be L1,L2 L3 levels and stop loss above H4. Target L1, L2 and L3

Case 3: Open price is between L3 and L4

Wait for the price to go above L3 and then when it moves back above L3 again go long. Target will be H1,H2 H3 levels and stop loss  below L4.

Wait for the price to go below L4 and then when it moves below L4 go short. stop loss above L3. Target 0.5%, 1% and 1.5%

Case 4: Open price is above H4

Buying can be risky at this level. Wait for the price to go below H3. As soon as the price moves below H3 go short. stop loss above (H4+H3)/2. Target L1 , L2 and L3

Case 5: Open price is below L4

Selling could be risky at this level as price has opened with big gap down. Wait for the price to go above L3. When the price moves above L3 buy with stop loss of (L4+L3)/2. Target H1, H2 and H3

These are the five cases based on open price on which you have to take trading decision. It gives good results by combining camarilla with other technical indicators like RSI and MACD you can further improve the accuracy. You can easily create Camarilla pivot calculator in excel. I have embedded a Camarilla Pivot point calculating excel sheet. You can refer it to create your own  https://docs.google.com/spreadsheets/d/1rdN_DAtU7PoU7Yeqx9UBeY4RIuM_O8xNgO8-QB-9vPg/edit?usp=sharing

1. Zain

What is the best timeframe to use thr camarilla lebels as per ur strategy?

1. Abhishek Shukla

Time frame doesn’t matters because you just use it for intraday and levels are calculated on previous days open high low and close.

2. Sonit Singh

Hi, is this trading strategy tested and can we re enter if our stop loss is hit.

3. alen

i have a question ,what is the scenario if the market openned above H4 or openned below L4 ???? thanks for your cooperation

1. Abhishek Shukla

This is the case of huge gap up or gap down that generally occurs due to some news events. This gap tends to get filled so better is to avoid trading

Mr Abhishek Shukla I recently started trading in commodities can u plz help me in this regard

4. Bibin Frederick

Sir i had some doubts 1.Open price is between H3 & L3;If the price breaks above H4 shall we Buy?2.if stoploss hit shall we re enter?

5. vignesh

What’s d success level of camarilla equation for day trading?
Suppose for 100 trades., how much it will positive one?

6. Sanjay Singh

very very much useful and essaintiol for day trader

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