Camarilla Pivot Strategy - Tips to Use

Even if Camarilla pivot sounds new, you are probably familiar with different types of pivot points as a crucial part of trading charts and technical analysis in general. Some of you have already used Fibonacci or Standard pivots to predict the price level as well as the moment it is going to revert.

Different types of pivot points make it possible for the trader to choose the best market entry or exit position. This fact makes that inevitable for both beginners and experienced players. With every new tool, you have a chance to expand your trading strategy. In this review, we will learn basic Camarilla pivot trading rules and trading strategies to use under real market conditions.

Baseline Camarilla pivots trading rules

The first thing you should know about the Camarilla pivot point is that it is a type of technical indicator. Traders use it whenever they need to recognize the price levels as well as identify the best market entry and exit points. The Camarilla pivot point has proved to be very versatile in terms of data it can generate.

It may be used along with trading risk management strategies. Users may implement it as a stand-alone Camarilla trading strategy depending on your goals. No matter how you plan to use the Camarilla pivot, always keep in mind that it is influenced by the market conditions within a given timeframe. As a result, the Camarilla trading strategy has several major forms depending on how and why a trader is going to use it.

Unlike traditional pivot points, the Camarilla is a more up-to-date and advanced version of the indicator. They help to discover hidden support and resistance levels. It is a great tool whenever you plan the upcoming day trading session.

In simpler words, Camarilla pivot points make it simpler for users to plan their trading day ahead. Here is why you may want to use this particular approach:

• Camarilla pivot points help to identify reliable support and resistance levels.
• They generate more precise bullish and bearish signals.
• They help traders identify when another trend is about to show up.
• They accurately reveal bullish and bearish price zones.

To make things easier for beginners, in this article we will answer the following questions:

1. What Is Camarilla pivot point?
2. How to use the Camarilla trading strategy?
3. What are the main Camarilla pros and cons?

Stay tuned and find out everything you need about this pivot point and trading opportunities it delivers out of the box.

Camarilla pivot point explained

As you already know, the classical or floor pivot point brings the key support and resistance levels to the trader. Camarilla pivot is an extension of those points. What's more. It consists of 4 support and 4 resistance levels that are located closer when compared to other pivot point types and variations. For this reason, Camarilla pivot works mainly with short-term trading tactics.

Common Camarilla trading strategies

The main idea behind the indicator is based on the idea that the market price can naturally revert to the previous day’s closing price.

With Camarilla pivot points, investors can cover several trading scenarios. To gain success with this particular tool, you need to consider some of the baseline rules:

1. When entering a bullish position, one needs to use Camarilla pivot points to buy near the predetermined support levels.
2. When entering a bearish position, one can use Camarilla near the pre-calculated resistance levels.

To calculate levels, it is better to use ready-made Camarilla calculators available online. Advanced versions offer two additional levels of both support and resistance, making traders’ calculations even more accurate.

Generally, extra support and resistance levels show up when the market sees a strong momentum burst. If you do not feel like learning how to calculate Camarilla pivot points, use the following tip:

• R5 = R4 + 1.168* (difference between R4 and R3)
• R6 = (High/Low) * Close
• S5 = S4 – 1.168* (difference between S3 and S4)
• S6 = Close – (difference between R6 and Close)

Traders usually opt for several common approaches when using the Camarilla trading strategy. They depend on particular techniques and trading style. Here are the most common ways to trade using Camarilla pivot points.

Camarilla strategy is not the only one you can learn about. Read more about other strategies in our education section. MTrading allows using any strategies while providing one of the best trading conditions in the market. Start trading today!

Camarilla trading strategy #1 – Range Trading

A range is a market where traders act between the support and resistance lines. Also known as range traders, they use Camarilla pivot points to find short-term reversals and price tendencies to revert in the future. They are generally focused on the way the price is moving inside the daily trading range. It is the area confined between the S3 and R3 pivots.

The key benefit here is that you may look for the price that moves towards either support or resistance. If resistance is holding, traders would probably open short positions close to the R3 pivot expecting the price moving towards support. And vice versa.

Camarilla trading strategy #2 – Trend Trading

The second approach considers following the trend. It differs from range trading. A trend comes as a powerful move that indicates the direction. What's more, it has a great impact on the price and pushes it to higher or lower levels within a specific timeframe.

The key benefit of using Camarilla trading strategy here is the ability to pivot to deliver the key data letting traders place appropriate stop-loss or limit orders as well as identify the best market entry point. When the market follows the increasing trend, it ensures great purchasing opportunities near the R3 pivot while the stop-loss is better to place next to R4.

The above-mentioned example is based on trading currency pairs.

Camarilla pivot point pros and cons

Camarilla pivot is definitely a useful tool that results in enhanced trading strategies. On the other hand, it does not work for everyone and has some obvious downsides as well as crucial benefits.

Camarilla pivot pros:

• Identifies support and resistance.
• Helps traders to work out a plan beforehand.
• Automatically generates daily trading levels.
• Identifies points that trigger both bullish and bearish activities.
• Helps to locate clear exit and entry points.

Camarilla pivot cons:

• Not good for long-term traders.
• Seems complicated for beginners.
• Additional losses in case of the wrong implementation.

The bottom line

Using the Camarilla trading strategy will certainly bring some benefits to short-term traders. It helps to identify the price levels and their tendency to revert. Besides, the pivot point shows the best market entry and exit positions. It helps to properly place stop-loss and limit orders. On the other hand, beginner traders may find it complicated from the start, which will eventually result in the wrong application and extra losses.

Whatever you choose, make sure you are well aware of how limit orders work. Also keep in mind that this material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.