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Most Logic Trading Strategy For The Camarilla Pivot Levels (Case Study)

30 August 2018, 08:20

Mpendulo Chiliza

5 306

Introduction

On this article i will explain a very logic, but simple way to trade on the market using the Camarilla Pivot Points, i will use graphical case studies so they will be no misunderstandings. This strategy works because "Price has natural tendency to go back to the mean price", with this in mind, we will focus on 8 lines mainly the four most interesting levels H4, H4, L3 and H4.

What are the Camarilla Pivot Levels (Graphically)

The Camarilla Pivot points/levels are a set of divider lines on your chart that mark four Support and Resistance levels of a current trend. We use these levels

to target TakeProfit and Stoplose of an order. All types of traders can implement the Camarilla pivot levels, but is mostly famous among intraday traders.

How To Calculating the Camarilla Pivot 8 Levels?

The following table explains how the Camarilla Pivot Points are calculated, bellow are the formula variables.

Level	Name	Formula
H4	Resistance 4	CLOSE + RANGE * 1.1/2
H3	Resistance 3	CLOSE + RANGE * 1.1/4
H2	Resistance 2	CLOSE + RANGE * 1.1/6
H1	Resistance 1	CLOSE + RANGE * 1.1/12
L1	Support 1	CLOSE - RANGE * 1.1/12
L2	Support 2	CLOSE - RANGE * 1.1/6
L3	Support 3	CLOSE - RANGE * 1.1/4
L4	Support 4	CLOSE - RANGE * 1.1/2

HIGH  = previous day average highest price
LOW   = previous day average lowest price
CLOSE = previous day average closing price
RANGE = HIGH - LOW
PP    = (HIGH + LOW + CLOSE)/3

Visualize the Trading Strategy!

images make for the best explanation, so once you able to visualize your strategy you will not ever have to worry about emotions clouding your judgement, every trade is clear. The Camarilla Pivot levels strategy can be simply explained using the following diagram.

camarilla diagram


yellow line	Direction to open sell order
pink line	Direction to open buy order
grey area	No trade region
middle area	Trading Zone
area between L3 and L4	Support region
area between H3 and H4	Resistance region

Case 1

(A) If open price crosses under H3 and crosses over H3 again, open Sell order (Takeprofit = L3 and StopLoss = H4)

(B) else if open price crosses over L3 and crosses under L3 again, open Buy order (Takeprofit = H3 and StopLoss = L4)

Case 2

(D) else If open price crosses under H4, open Buy order (Takeprofit = potential_breakout and StopLoss = H3)

Case 3

(E) If open price crosses over L4, open Sell order (Takeprofit = potential_breakout and StopLoss = L3)

(F) else If open price crosses under L3, open Buy order (Takeprofit = H3 and StopLoss = L3)

Case 4

(G) if open price is on the grey area, ignore until it move closer to the Resistance region or Support Region.

Available indicators

-screenshot-

Camarilla Levels Pivot Free by oneoleguy

Available Signals

-screenshot-

I'm planing on building one of my own, when its done, i will share the link on the updated version of this article.

Conclusion

Many have difference views about this indicator but I found this one strategy to make the most sense for this indicator, logically and account management wise (take-profit and stop-lose targeting). The Camarilla Pivot Points make it easy to open and close order without falling victim to your own emotions.

Good Luck

NOTICE: you can apply the same logic with the other pivot points namely Woodie - Tom DeMark's - Floor - Fibonacci

#Camarilla pivot points

Pedro Jr Garcia 2023.08.16 04:30 #1

I have been using camarilla pivots for some time on stocks. There are a few other indicators I use in order to give me confirmation on a trade. I use the cam pivots for breakouts only and I wait until the current session pivots are very noticeably narrower than the previous session indicating that participants have found value within the price of the stock. I then watch the RVOL at the market open to see whether there is increased volatility. If there is sufficient RVOL (>= 80%), and there is sufficient volume (>=100k), and if going long, there is sufficient liquidity "laddered" to the top side with lighter amount of orders to the downside, I then wait for price action to hit R4 or the 4th pivot to the top side and enter the trade with a stop loss at the 3rd pivot. I take a partial at the 5th pivot, move the stop to break even and take another partial at the 6th pivot then trail the rest. This is how I successfully play breakouts using the pivots. It is also about being in the right stock. I trade very liquid mega cap stocks and ETF's (or their CFD's).

The camarilla pivots provide a "where" to enter and manage risk. There are other data that should be watched in order to receive confirmation. The order book and tape provide valuable feed back for hidden sellers and buyers as well as where the liquidity is.

For assets such as FX pairs where you don't have an order book, etc, I usually watch the spread to become tight and very narrow pivots. I use this on high liquid pairs such as EURUSD. Being in the right asset is a must. There are some assets that chop or don't give clean moves.

If you play the pivots right, it will provide a real edge. I believe the pivots work because of feed back it provides such as the range an asset is trading it and how much price action will move to trigger algos and psychological effects on the retail traders manually trading.

In trading, it is very important to really define your edge to make things work in your favor over a period of time. An indicator is only a data set that helps you to process information more faster. If you don't understand an indicator your using, it becomes useless.

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