Camarilla is a trading method used fordoing intraday trading in various markets like Forex, Equities,Futures, Commodities. This suggests that today's intraday support andresistance can be predicted using yesterday's volatility. CamarillaEquation produces 8 levels from yesterday's high, low and close.These levels are split into two groups, numbered 1 to 4. The patternformed by the 8 levels is broadly symmetrical, and the most importantlevels are the 'L3', 'L4' and 'H3', 'H4' levels. While day trading,traders look for the market to reverse if it hits an 'L3' or 'H3'level. They would then open a position AGAINST the trend, using astop loss somewhere before the associated 'L4' or 'H4' level.
Detailed process is explained below.
The another way to day trade with theCamarilla Equation is to regard the 'H4' and 'L4' levels as'breakout' levels - in other words togo WITH the trend if prices push through either the H4 or L4 level.This essentially covers all the bases - Day Trading within the H3 andL3 levels enables youto capture all the wrinkles thatintraday market movement throws up, and the H4 - L4 breakoutplays allow the less experienced traderto capitalise on relatively low risk sharp powerfulmovements.
What is the method to calculate thesimple camarilla 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 trade based on SimpleCamarilla Levels ?
Once the camarillalevels from L4 – H4 are found, trading is done based on the openprice of thestock orunderlying. Instead of open price, we can also take the WAP (WeightedAverage Price)of the first 5 minof market open.
Now depending onthe open price, we consider below four scenarios:
Scenario 1:Open price is between H3 and L3
- To enter longposition (i.e. To Buy)
o Wait for theprice to go below L3 and then when it moves back above L3,
buy.
o Stoploss shouldbe placed when price moves below (L3+L4)/2.
o Targets :Target1 = H1, Target2 = H2, Target3 = H3
- To enter shortposition (i.e. To Sell)
o Wait for theprice to go above H3 and then when it moves back below H3,sell
or go short.
o Stoploss shouldbe placed when price moves above (H4+H3)/2.
o Targets :Target1 = L1, Target2 = L2, Target3 = L3
Scenario 2:Open price is between H3 and H4
- To enter longposition (i.e. To Buy)
o Wait for theprice to go above H4. As soon as price moves above H4 buy.
o Stoploss shouldbe placed when price moves below (H4+H3)/2.
o Targets :Target1 = 0.5%, Target2 = 1%, Target3 = 1.5%
- To enter shortposition (i.e. To Sell)
o Wait for theprice to go below H3. As soon as the price moves below H3, sell
or go short.
o Stoploss shouldbe placed when price moves above (H4+H3)/2.
o Targets :Target1 = L1, Target2 = L2, Target3 = L3
Scenario 3:Open price is between L3 and L4
- To enter longposition (i.e. To Buy)
o Wait for theprice to go above L3. As soon as price moves above L3 buy.
o Stoploss shouldbe placed when price moves below (L4+L3)/2.
o Targets :Target1 = H1, Target2 = H2, Target3 = H3
- To enter shortposition (i.e. To Sell)
o Wait for theprice to go below L4. As soon as the price moves below L4, sell
or go short.
o Stoploss shouldbe placed when price moves above (L3+L4)/2.
o Targets :Target1 = 0.5%, Target2 = 1%, Target3 = 1.5%
Scenario 4:Open price is above H4
- To enter longposition (i.e. To Buy)
o NA. Buying isnot suggested in such scenarios.
- To enter shortposition (i.e. To Sell)
o Wait for theprice to go below H3. As soon as the price moves below H3, sell
or go short.
o Stoploss shouldbe placed when price moves above (H4+H3)/2.
o Targets :Target1 = L1, Target2 = L2, Target3 = L3
Scenario 5:Open price is below L4
- To enter longposition (i.e. To Buy)
o Wait for theprice to go above L3. As soon as price moves above L3 buy.
o Stoploss shouldbe placed when price moves below (L4+L3)/2.
o Targets :Target1 = H1, Target2 = H2, Target3 = H3.
- To enter shortposition (i.e. To Sell)
o NA. Selling isnot suggested in such case.
A simplificationis to calculate profit targes with ratio stop loss 1: 1
Filter whendistance between L4 - L3 and H3 .H4 is below of 20 pips do not tradeGBP/USD
EUR/USD 16 pips,USD/JPY 20 pips.
Camarilla pivot issuitable for trading with Martingala.
See examples inpictures:
Below the link fordownload Camarilla Pivot indicator Metatrader 4.
https://drive.google.com/file/d/0Bwjv2Pbf48itdHRJNVg3bmZYM00/view?usp=sharing
