Camarilla Equation Trading Method 1

The Camarilla Equation produces 10 levels from yesterday's high, low and close. These levels are split into two groups, numbered 1 to 5. The pattern formed by the 10 levels is broadly symmetrical, and the most important levels are the 'R3', 'R4' and 'S3', 'S4' levels. While day trading, traders look for the market to reverse if it hits an 'S3' or 'R3' level. They would then open a position AGAINST the trend, using a stop loss somewhere before the associated 'S4' or 'R4' level. The camarilla theory suggests setting stoplosses that appear to you the trader to be prudent, and to not even open the trade until it has penetrated the level in the 'right' direction, i.e. demonstrated that it has found resistance (or support). In the case of the higher R3 level, this would mean that price had already reversed and pushed back down thru the level, heading south.

The second way to try day trading with the Camarilla Equation is to regard the 'R4' and 'S4' levels as 'breakout' levels - in other words to go WITH the trend if prices push thru either the R4 or R4 level. This essentially covers all the bases - Day Trading within the R3 and S3 levels enables you to capture all the wrinkles that intraday market movement throws up, and the R4 - S4 breakout plays allow the less experienced trader to capitalise on relatively low risk sharp powerful movements. Here's what it looks like in action:-