Sunday, March 7

CAMARILLA Pivot Point For Day Trading



Hi All,
Today i will explain one more Trading System which is known as CAMARILLA Pivot Point which will come Handy for Day Trading Purpose.
Origins of the Camarilla Equation:
Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, which uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean. In other words, when markets have a wide spread between the high and low the day before, they tend to reverse and retreat back towards the previous day's close. Input to the Systems is yesterday’s open, high, low and close. These levels are, frankly, astounding in their accuracy as regards day trading, even to seasoned traders, who know all about support and resistance, pivot points and so on.

Camarilla Equation Levels: 
The Camarilla Equation produces 8 levels from yesterday's open, high, low and close. These levels are split into two groups, numbered 1 to 4. The pattern formed by the 8 levels is broadly symmetrical, and the most important levels are the 'L3', 'L4' and 'H3', 'H4' levels. While day trading, traders look for the market to reverse if it hits an 'L3' or 'H3' level. They would then open a position AGAINST the trend, using a stop loss somewhere before the associated 'L4' or 'H4' level. To calculate Camarilla Equation Levels (Click on this)
The second way to try day trading with the Camarilla Equation is to regard the 'H4' and 'L4' levels as 'breakout' levels - in other words to go WITH the trend if prices push thru either the H4 or L4 level. This essentially covers all the bases - Day Trading within the H3 and L3 levels enables you to capture all the wrinkles that intraday market movement throws up, and the H4 - L4 breakout plays allow the less experienced trader to capitalise on relatively low risk sharp powerful movements. Here's what it looks like in action:-


How to use this system:
Look at the opening price for the stock/futures/commodities/currency.
Scenario 1
Open price is between H3 and L3
  For Long
    Wait for the price to go below L3 and then when it moves back above L3, buy. Stoploss will be when price moves below L4. Target1 - H1, Target2 - H2, Target3 - H3 

For Short Sell
    Wait for the price to go above H3 and then when the price moves back below H3, sell. Stoploss will be when price moves above H4. Target1 - L1, Target2 - L2, Target3- L3
Scenario 2
Open price is between H3 and H4
For Long
When price moves above H4, buy. Stoploss when price goes below H3. Target - 0.5% to 1%
For Short Sell
When the price goes below H3, sell. Stopless when prices moves above H4. Target1 - L1, Target2 - L2, Target3- L3
Scenario 3
Open price is between L3 and L4
For Long
When price moves above L3, buy. Stoploss when price moves below L4. Target1 - H1, Target2 - H2, Target3 - H3
For Short Sell
When the price goes below L4, sell. Stoploss when price moves above L3. Target - 0.5% to 1%
Scenario 4
Open price is outside the H4 and L4
Wait for the prices to come in range and trade accordingly.
To calculate Camarilla Equation Levels (Click on this) or Bookmark this Link:http://pivotpointscalculator.blogspot.com/

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Sunday, February 21

Pivot Points Trading

Introduction

The pivot point is the level at which the market direction changes for the day. Pivot Point trading is the most basic in trading and lots of traders use this so market finds support and resistance at Pivot Levels.

Pivot Points are support and resistance levels that are calculated using the open, high, low, and close, from the previous trading day. Standard pivot points include the pivot point itself, three full support levels, and three full resistance levels.

If the market opens above the pivot point then the bias for the day is long trades. If the market opens below the pivot point then the bias for the day is for short trades.

Most important points while trading using Pivots are Pivot Level,R1 and S1.


To Trade using Pivots look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

How to Trade Using Pivots

1.Before the start of trade we should be ready with the pivot levels for a particular stock/Index we want to trade.I have made an auto update sheet which gets update EOD Basis Click Here 

2.Market Open following scenarios Apply:
Open is above Pivot: Buy
Open is below Pivot: Sell 


3. First Fundamental Of Pivot Trading After the opening range (first 15-30 min. to one hour), if price is above/below the Pivot, Price Action will strongly tend to remain above/below the Pivot for the session.
Although this rule bids us to wait out the Opening Range and thus avoid much of the wildness and whipsawing,

4.If the market opens, or later trades at the extremes (R2, R3 or S2, S3), it will exhibit a tendency to trade back toward the Pivot. Thus, the general rule, 'Avoid buying the High or selling the Low', becomes increasingly more stringent as price moves farther from the Pivot.


Practical Examples

Lets take the Example of Reliance.

Trading Levels for Reliance on 17 Feb were  High@ 1037.8 Low@1022 Close@1032 


When we calculate the Pivot Levels we get the Following Levels


Pivot:1030.6

R1:1039.6

R2:1046.4
R3:1055
S1:1023.4
S2:1014
S3:1007

 
 Now lets see how the trading goes on next day ie. on 18 Feb


Reliance opens @ 1030 ie. at Pivot Level and makes a high of 1038 that is the R1 as we have already calculated.But we need to see for sustained of levels and as told previously once price touch R1 we need to see whether they reverse from R1 or break it.


In our case price reverses from R1 ie. 1039 in our case and closes below the Pivot levels.


Now we can take short once price moves below Pivot ie 1030 with SL @ R1 and target of S1 1023,now once 1023 breaks than we can carry our short with target@ S2 

This was an ideal trade which one can execute with patience and discipline.Using Pivot trading one can make a decent living using trading when market are not much volatile.Do some paper trading with levels given on the sheet for Monday trading.


How To calculate Pivot Levels:
Calculation:
    PP = (YHigh + YLow + YClose) / 3
    S1 = (PP * 2) - YHigh
    S2 = PP - (YHigh - YLow)
    S3 = (2 * PP) - ((2 * YHigh) - YLow)
    R1 = (PP * 2) - YLow
    R2 = PP + (YHigh - YLow)
    R3 = (2 * PP) + (YHigh - (2 * YLow))

 YHigh = Yesterday High
 YLow  = Yesterday Low
 YClose = Yesterday Close


I have made an autoupdate Google Spreadsheet which Update the Pivot Levels of Nifty 50 Stocks 
Click Here to Get it and Bookmark that

Conclusion
Pivot points are yet another useful tool that can be added to any trader's toolbox. It enables anyone to quickly calculate levels that are likely to cause price movement. The success of a pivot-point system, however, lies squarely on the shoulders of the trader, and on his or her ability to effectively use the pivot-point systems in conjunction with other forms of technical analysis. These other technical indicators can be anything from MACD crossovers to candlestick patterns - the greater the number of positive indications, the greater the chances for success.

Golden Rule:
If the days high or low get broken early in the morning trade then go in that direction, period. Don't think!

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