Camarilla Pivot Forex Trading Strategy

Camarilla Pivot Forex Trading Strategy

Pivot points technique is one of the forex trading strategies that many traders use to identify potential levels as support and resistance. Simply put, pivot points and support and resistance levels generated through certain calculations are considered to be areas where prices will potentially change direction.

Camarilla Pivot Forex Trading Strategy

Camarilla Pivot Forex Trading Strategy

The Pivot point becomes very interesting because at least one of the causes: it is very objective. Unlike other technical indicators that require interpretation which is certainly strongly influenced by the “flight hours” that the trader has. Not even like Fibonacci retracements that still require the trader’s preference in determining swing high and swing low.

Application of Pivot Strategy

Trading strategies based on pivot points are usually used as short-term trading strategies. Traders who use it usually look for movements that are not too large, matching their intraday trading style.

Like trading strategies that utilize support and resistance, traders can choose whether they will implement a bounce / range-bound , breakout , or even both strategy.

Traders who embrace range-bound usually use pivots to look for reversal points. They will look for opportunities to buy in the support area and look for opportunities to sell in the resistance area.

Conversely, traders who breakout style will wait until the support breaks to find sell opportunities. Instead they will wait for a break of the resistance to look for buy opportunities.

Get to know the Camarilla Pivot Strategy

The strategy of Camarilla pivot (hereinafter we call Camarilla ) is one of the derivatives of the pivot points strategy .

This strategy is similar to his ancestors, the pivot points themselves, but is more complete to be used as a trading strategy. This strategy was created by Nick Stott around 1989 and is still popular today.

Basically there are seven lines that are an important part of this strategy, namely:

  • H5 = long breakout target
  • H4 = long breakout
  • H3 = short pivot
  • Pivot Point (PP)
  • L3 = long pivot
  • L4 = short breakout
  • L5 = short target breakout

The levels above are obtained through the following formula:

H5 = (H / L) × C
H4 = C + RANGE × 1.1 / 2
H3 = C + RANGE × 1.1 / 4

PP = (H + L + C) / 3

L3 = C – RANGE × 1.1 / 4
L4 = C – RANGE × 1.1 / 2
L5 = C– (H5 – C)

Where:

C = Closing Price (previous day’s closing price)

H = High (highest price of the previous day)

L = Low (the lowest price of the previous day)

RANGE = highest price – the lowest price of the previous day

If it is depicted on the chart , it will be like this:

Camarilla Strategy

Actually there are many techniques that can be developed, but still basically is bounce and breakout trading.

Here are some techniques you can try:

Bounce technique: if the price is opened between H3 and L3

You can open a buy position, if:

The price moves slightly below L3 but then manages to move back up above the L3 line. Some traders choose to combine with confirmation of trading signals such as candlestick patterns. There are also those that combine with technical indicators such as stochastic oscillator .

Place the target on the H3 line. Maximum target at H4 or H5. While stop loss can be placed below the L4 line.

You can open short positions, if:

The price moves slightly above H3 but then manages to move back up below the H3 line. You can combine it with a confirmation from a trading signal like a candlestick pattern. It can also be combined with technical indicators such as stochastic oscillator .

Place the target in the L3 line. Maximum target at L4 or L5. While for stop loss can be placed above the H4 line.

Breakout technique :

You can open a buy position, if:

Prices move up and break above the H4 line. Place the target at the H5 line and stop loss below the H3 line.

You can open short positions, if:

The price moves down and breaks below the L4 line. Place the target in the L5 line and stop loss above the L3 line.

Good luck.

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