Camarilla
pivot points are often used for scalping in a narrow range as in the
current conditions of low market volatility. Identification of
support and resistance in the range is done with these Camarilla
pivot points levels.
In
the current low market volatility conditions, trading in the very
short term (scalping) based on correction movements is a popular idea
and is often done by daily forex traders. Low volatility will tend to
form a narrow trading range. Price movements tend to be slow and
sometimes 'choppy', but are still in the range. Traders do not have
to wait for a price to break a certain level or determine a trend
based on Elliot waves and so on, but rather simply determine support
and resistance levels as the lower and upper limits of that range.
Determination of support and resistance levels is crucial, and in
these conditions the most popular is to use Camarilla pivot points.
Identification of support and resistance in a range is usually not
with Fibonacci retracement, but with the levels of Camarilla pivot
points. Camarilla is a variation of conventional pivot points and is
considered more accurate especially if prices move within a certain
range. The following is the formula for calculating Camarilla pivot
points:
Pivot
= ( H + L + C ) / 3
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
R1
= C + (H - L) x 1.1/12
R2
= C + (H - L) x 1.1/6
R3
= C + (H - L) x 1.1/4
R4
= C + (H - L) x 1.1/2 dimana H: harga tertinggi hari sebelumnya, L:
harga terendah hari sebelumnya, C: harga penutupan hari sebelumnya,
S: level support, R: level resistance. Berikut contoh penerapannya
pada USD/CHF time frame 5 min:
As
shown in the picture above, S4 and R4 are extreme levels and can be
considered a breakout level. The price moves between S3 and R3, and
the trader will wait for an entry opportunity when the price movement
reverses after reaching S3 or R3. Trading in a sideways market
(ranging) like this is very possible to be done as long as the price
has not penetrated its extreme levels, therefore the stop loss and
target (take profit) are determined close to extreme levels (S4 and
R4). Momentum entry can be confirmed by the oscillator indicator
(RSI, stochastic or CCI).
In
the example above, the trader sells at the moment the price reverses
direction after reaching resistance R3. Camarilla pivot points are
often used for scalping in a narrow range and are not suitable for
wide ranges or strong trending market conditions
Camarilla
pivot is a trading tool present in all professional trading
platforms.
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