The Camarilla Exchange indicator shows simple reversal levels on the chart. These levels were discovered in 1989 by Nick Scott, a well-known and successful de-trader in the process of trading in financial markets. As shown below, this indicator looks like simple levels of support and resistance, even something similar to pivot levels, but these levels are calculated by quite a different formula.
The theory on which these levels are constructed is very simple and sounds like this: many sessions have a craving to return to the middle. In simple words, this can be explained as follows: when the market was a big gap between the maximum and minimum price of the previous day, they are likely to reverse back to the closing price. The very equation by which the levels are calculated has a very complex component, since only the maximum and minimum prices and opening and closing prices of yesterday are used to calculate all levels.
How to use Camarilla Exchange Technical Indicator?
On such seemingly simple levels of support and resistance, there are several tactics of trade, besides they are so simple that they can be used simultaneously. Just want to say that all the trading tactics described below, only work within a day.
Trade in the channel. It’s all very simple when the price goes to your red or green lines, open a deal for the rebound from the level, the stop loss is placed between the open order and the nearest purple line, roughly in the middle, the profit target is the opposite level, red or green, the risk / profit ratio comes out about 1: 2, which is pretty good. Also for more aggressive traders, stop-loss can be betted, right on the nearest purple level, it all depends on your style.
Trade on the breakdown of levels. Here, deals open in the breakdown of the purple levels in the direction of breakdown, such breakdowns do not always give great results, but when trading for 5 minutes, the profits are quite good. Stop is placed on the nearest level or between them.
Trade in the “purple” channel. Here, deals are opened when the price approaches one of the purple levels in the hope of getting out of the level, the stop can be set arbitrarily, and the goal is the opposite violet level. Transactions in this tactic are rare, but they help to “catch” large trends, which allows one profit to cover all losses.
As you can see from these tactics, trading from levels is very simple, the main thing to look at is a bit of history, as the price behaved earlier, with respect to these levels, then it will be even easier to trade.