The Camarilla Equation is a trading system developed by Nick Stott back in the late 1980s, and it’s become a valuable tool for traders around the world.
This system comprises either 8 or 10 levels—depending on the version you’re using—calculated using the Open, Close, High, and Low prices from the previous trading session. It provides a set of guidelines on how to apply these levels effectively in your trading strategy.
The levels are split into two groups. The first group is derived from yesterday's Close price and is labeled with an 'L' for Low, ranging from L1 to L5. The second group moves upwards from the same Close price, marked with an 'H' for High, also ranging from H1 to H5.
It's important to note that levels L1 and L2 have a lesser impact and are often overlooked. However, L5 and H5 are crucial and should never be ignored, even if some sources tend to dismiss them.
Here’s how you calculate the Camarilla levels:
H2 = close + (high-low)*1.1 /6
H3 = close + (high-low)*1.1 /4
H4 = close + (high-low)*1.1 /2
H5 = (high/low)*close
L1 = close - (high-low)*1.1 /12
L2 = close - (high-low)*1.1 /6
L3 = close - (high-low)*1.1 /4
L4 = close - (high-low)*1.1 /2
L5 = close - (H5 - close)
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