Forex for Beginners Answering all your questions about Forex! The Camarilla Equation in Forex calculates eight levels of intra-day support and resistance according to yesterday’s High, Low, Open and Close. There are 5 of these “L” levels below yesterday’s close, and 5 “H” forex pivots how effective is the pill above. They are numbered L1, L2, L3, L4 and L5 etc.
The most important levels are L3, H3 levels and L4, H4 levels. The main way to use Camarilla equation in Forex is to wait for price to approach L3. When price does so, traders expect market to reverse at L3 and H3 level and so they open positions against a trend and place protective stop loss outside closest L4 or H4 level. H4 is only a suggested stop, you’ll learn why below, traders are encouraged to find their own stops according to the money management rules and risk appetite. Yes, if you trade aggressively, No, if you like to see confirmation first. H3 level, find support or resistance there and clearly demonstrate an intention to reverse. Traders may want to learn about reversal candlestick formation patterns in order to be able to spot a confirmation of a turning market.
H4 levels to be breached, which would signal of a breakout trade setup and allowing traders trade breakout in the direction of a trend. H4 level, the chances are it is going to keep on running that way. H4 level expects to capture sharp directional market moves. H5 level or your own target.
After setting Camarilla levels on the charts, traders look at where the market has opened regarding the levels. H3 levels, you must wait for price to approach either of these two levels. The opposite, applies when the Lower L3 level is hit first – go Long against the trend. H4 levels act as you Stop loss. WILL want to take profits at some time during the day, because the market is unlikely to “behave” and stay right-sided for your trade. H3 appear to happen as often as 4 times out of 5 during intra-day trading.