Camarilla Equation Trading Method 3

Trading with the Camarilla Equation

Trading with the Camarilla Equation is discretionary - although the main 'philosophy' of the system seems mechanical, a reasonable amount of experience and knowledge is needed to trade the equation well. Basically, you give the Equation yesterday's open, high, low and close. The Camarilla Equation will then give you 10 levels of intraday support and resistance. There are 5 of these 'S' levels above yesterday's close, and 5 below. Below the close they are numbered S1, S2, S3, S4 and S5, and above the close R1, R2, R3, R4 and R4. The important levels to note are the 'R3' and 'S3' levels, points where significant reversals are likely, and the 'R4' and 'S4' levels which are where breakouts have a tendency to start. How you specifically enter a trade depends to some extent where the market opens.

Market Open BETWEEN 'R3' and 'S3'

If the market opens BETWEEN the R3 and S3 levels, you must wait for price to approach either of these two levels. Whichever level it hits first gives you your first trade.

If the R3 level is hit, the idea is that you go SHORT (against the previous trend) in the expectation that the market is about to reverse, with a stoploss point somewhere between the R3 and R4 levels (if it hits R4, chances are it's going to breakout bigtime upwards, so you want your stop to be before that!).

Camarilla, suggest that you wait for price to bounce back down into the R3 level again before entering the trade, as you will therefore be technically trading WITH the short term trend. You need afair amount of experience for this style of trading. The opposite, of course applies if the SUPPORT S3 level is hit first - wait for it to come back up, then go LONG.

Page 2.....