Camarilla Pivot Points is an adapted version of the traditional Pivot Point. Introduced in 1989 by Nick Scott, a successful bond trader, the fundamental concept behind Camarilla Pivot Points is that prices tend to revert to their mean until they do not. The key distinction from the classic pivot point formula lies in the incorporation of Fibonacci numbers in the calculation of pivot levels. Camarilla Pivot Points serve as a mathematical tool for price action analysis, generating potential intraday support and resistance levels. Like classic pivot points, it utilizes the previous day’s high price, low price, and closing price.

Camarilla Pivot Points consist of eight levels that function as support and resistance values for the current trend. These pivot points are beneficial for all traders, assisting in determining appropriate stop loss and profit target orders.

Formulas for calculating the levels are as follows:

• C = Previous day’s close
• H = Previous day’s high
• L = Previous day’s low
• R4 = (H – L) x 1.1 / 2 + C
• R3 = (H – L) x 1.1 / 4 + C
• R2 = (H – L) x 1.1 / 6 + C
• R1 = (H – L) x 1.1 / 12 + C
• S1 = C – (H – L) x 1.1 / 12
• S2 = C – (H – L) x 1.1 / 6
• S3 = C – (H – L) x 1.1 / 4
• S4 = C – (H – L) x 1.1 / 2

The most significant levels are S3, S4, and R3, R4. R3 and S3 are levels to trade against the trend, with a stop loss placed around R4 or S4. Conversely, S4 and R4 are viewed as breakout levels; when these levels are surpassed, it signals a time to trade with the trend.

Camarilla Pivot Points provide direction for both sideways and trending markets. Trading with Camarilla Pivot Points is based on the opening price of the next day (or session). Depending on the opening price, the tool can indicate a trade that may capitalize on a reversion to the mean or a breakout to new highs or lows. Below are five scenarios illustrating how traders can utilize Camarilla Pivot Points.

Scenario #1: Open price is between R3 and S3

Buy when the price rises back above S3 after dipping below it. The target will be R1, R2, and R3 levels. Set a stop loss at the S4 level. Wait for the price to exceed R3, and then when it falls back below R3, sell or short. The profit target will be S1, S2, and S3 levels, with a stop loss above R4.

Scenario #2: Open price is between R3 and R4

Buy when the price moves back above R3 after dropping below it. The target will be 0.5%, 1%, and 1.5%. Set a stop loss at R3. Wait for the price to rise above S3, and then when it falls back below S3, sell or short. The target will be S1, S2, and S3 levels, with a stop loss above R4.

Scenario #3: Open price is between S3 and S4

Wait for the price to rise above S3, and then when it moves back above S3 again, go long. The target will be R1, R2, and R3 levels, with a stop loss below S4. Wait for the price to drop below S4, and then when it moves below S4, go short. Set a stop loss above S3, targeting 0.5%, 1%, and 1.5%.

Scenario #4: Open price is above R4

Buying at this level can be risky. Wait for the price to drop below R3. As soon as the price falls below R3, go short. Set a stop loss above (R4+R3)/2, targeting S1, S2, and S3.

Scenario #5: Open price is below S4

Selling at this level could be risky due to a significant gap down. Wait for the price to rise above S3. When the price exceeds S3, buy and set a stop loss at (S4+S3)/2, targeting R1, R2, and R3.

These five scenarios illustrate how to effectively use Camarilla Pivot Points. For improved results, consider combining Camarilla Pivot Points with other technical indicators such as Stochastic, RSI, and MACD.