What is the CamarillaEquation?
The CamarillaEquation is a technical tool that was developed for the intraday trading on the stock and bond markets. It's an effective way of identifying support and resistance levels and also a good technique for identifying breakout trades.
The formula of the CamarillaEquation is similar to the standard Pivot Point formula, but with Fibonacci numbers added. The CamarillaEquation was first used in the bond market, but has since become popular with forex traders.
In general, this indicator is used by traders who look for short term range reversals in the markets. Traders who want to use this indicator should pay particular attention to the S3 and R3 pivots, as they can provide a lot of opportunity for short term reversals in ranges.
There are a number of forum threads that claim to reveal a 'Camarilla Equation', but they usually refer to simplistic 'pivot point' type calculations. In addition, many of these threads attempt to backtest against the SureFireThing 'Camarilla' Trading manuals and illegally republish them without permission.
Despite the fact that there are a few different versions of the 'Camarilla' equation, the most reliable is the one that uses yesterday's high and low price. This is a much more accurate method than simply plotting the previous day's closing prices, as it allows for more granular data to be plotted.