Camarilla pivots trading strategy (Forex, stocks)
Similar to normal pivot points, but it is more ready trading system. Created by trader Nick Stott in the end of 80’s it still being used by many traders.
We have lines:
- H5 – long breakout target H4 – long breakout
- H3 – Short Pivot
- L3 – Long
- L4 – short breakout
- L5 – short breakout target
So same as with pivot points, there is a middle line – pivot.
3.1. Camarilla lines
There are few strategies, based on that when a price was in the start of the trading day (London session). Let’s take a quick look at example trading rules:
Scenario 1 – price open between H3 and L3 lines
When to go long:
Wait until price move below L3 line and move back above it – it is time to go long. Sometimes price bounce from level, then we need another signal to enter (from price action, moving average or oscillator).
Close position at H3 line (or H4/H5 if trend is strong and you have a good trailing system). Stop loss below L4 line.
When to go short:
Wait until price move above L3 line and move back below it – it is time to go short. Sometimes price bounce from level, then we need another signal to enter (from price action, moving average or oscillator).
Close position at L3 line (or L4/L5 if trend i strong and you have a good trailing system). Stop loss below H4 line.
3.2. Price between H3 and L3
Scenario 2 – price open between H3 and H4
3.3. Price open between H3 and H4. Example when there was a long signal at close above H4 (exit at H5)
When to go long:
When price moves above H4 line, we go long.
Target is H5 line.
Stop loss below H3.
When to go short:
When price crosses below H3 line, go short.
Target is L3.
Stop above H4.
Scenario 3 – price open between L3 and L4
When to go long:
When price moves above L3 line, we go long.
Target is H3 line.
Stop loss below L4.
When to go short:
When price crosses below L4 line, go short.
Target is L5.
Stop above L3.
Scenario 4 – price open below L4 line or above H4 line.
Wait until it comes back and play according to scenario 1, 2 or 3.
So… how to use it?
This is a great tool, but I can write a separate manual about trading with Camarilla. You do not have to follow rules which I have described above. Check examples below and see how it works.
SPX, 5m chart
3.4. Price open between H3 and H4. Example when there was a long signal at close above H4 (exit at H5)
SPX is under pivot line (yellow). After range move, we can see that bears are up to something. We had sell signals from MACD and CCI, also moving averages were negative (so 21 below 33, and 33 below 55). L3 long did not hold and SPX started to move down. It looked like L4 is not a target and we will have a continuation of move down. But no, things worked out different. It was a false breakout and bulls came back. You can see that they managed to move up to the 1945 points. I wanted to show this example for a reason – there are no 100% sure signals – sometimes it looks like it is all going well and you have signal but price reverse. That is why I use trailing stop loss. In that example after going short, let’s say 1933 points, you would lower your stop to place it after each next lower high. This kind of traps happens.
Oil, 15m chart
3.5. Short trade from L3 to L5
Here all worked great. Actually, I opened this trade on 5 min chart, but this is clearer on the 15 minute chart. We are below pivot line (yellow), averages are negative. There are signals to go short from MACD and CCI (near L3 line). I shorted at L3, closed at L4, and shorted again when L4 failed and there was a break below L4. It is up to you how you manage your trade. Just wanted to show you that sometimes we have a strong move from L3 to L5 without or with a very short pause at L4 line. If trend is strong then L5 is a target.
EURUSD, 5m chart, part 1
On the 5m EURUSD it looked like we may have a move up from L3 towards L4. There was even a signal from MACD, but as you can see this was a false signal (also averages were negative at that time). After failed move to go long, price reversed and moved down to the L4:
3.6. Move up failed, but…
EURUSD, 15m chart, part 2 of trade
When you checked higher time frame, it was clear that downtrend is still in place and there is no point of taking a long position:
3.7. … on higher time frame there was still a downtrend
EURUSD, 5m chart
3.8. Short trade after break below pivot line
Right below H3 we have a dotted yellow line which is a pivot line. We got signal from MACD and CCI to go short, but it was good to wait for break below pivot line. On some occasions it may work as support and you will see a bounce from here. In this case we saw that pivot line is not a support and we had a short breakout – this was our entry point. Take profit target was L3 line, which worked nicely.
How do you calculate the levels?
levels are calculated automaticaly by this indicator
Thanks for the lesson. I appreciate the failed trades and explanations for those as well.
HELLO
WHICH PAIR THIS USE BETTRE?
I recommend major pairs, because you need good trading conditions (low spread etc.).
Hi Simon! Did you calclate how much pips are in profit per month/year with only camarilla on EUR/USD?
No. On daily basis, I use traditional pivot points so I haven’t done this sort of calculation.
What Moving Averages do you use?
I was experimenting a lot with different averages. Decided that for my trading style the best averages are: 50 EMA and 100 SMA. Sometimes I’ll add shorter average like 21 or 34 EMA. That’s it.