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Chapter 15, Part III. Other ways of Pivots calculation. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    CAMARILLA PIVOT POINTS




    Name Camarilla means a group of confidential, often scheming advisers; a cabal (Spanish, diminutive of cámara, room, from Late Latin camera) – here is the explanation of this word from inventor of these pivot equations 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”.

    This is just for information. But let’s discuss how to trade them, because they have a bit another using algorithm. Usually Camarilla Pivots are used for intraday trading and most importance has R3/S3 and R4/S4. R3 and S3 use for trading against the trend. If market finds resistance at R3 or Support at S3 and reverses back from these levels, despite the fact that the previous move was in the opposite direction – then you can enter against the trend with stop order near S4 and R4 and expecting some retracement. But if market breaks above R4 or below S4, then it tells that overall trend is strong and you should open position in the direction of trend. Of cause this is very simple explanation, but possibly it will be interesting for you and you can investigate Camarilla Pivots with more scrutiny.

    Taking a look from a math standpoint on Camarilla pivots tells us that the major idea is the assumption that price gravitates to mean value, and in our case to Close price. As you can see in Support and Resistance calculation it does not use PP, but Close price instead. Anyway, these levels could be useful, some traders think that they even better than standard Pivots.


    R4 = C + RANGE * 1.1/2

    R3 = C + RANGE * 1.1/4

    R2 = C + RANGE * 1.1/6

    R1 = C + RANGE * 1.1/12

    PP = (HIGH + LOW + CLOSE) / 3

    S1 = C - RANGE * 1.1/12

    S2 = C - RANGE * 1.1/6

    S3 = C - RANGE * 1.1/4

    S4 = C - RANGE * 1.1/2

    RANGE = HIGH – LOW
     
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