# Camarilla Pivot Points

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## Definition of 'Camarilla Pivot Points'

The formula used in the calculation of Camarilla Pivot Points are:

R4 = C + RANGE * 1.1/2
R3 = C + RANGE * 1.1/4
R2 = C + RANGE * 1.1/6
R1 = C + RANGE * 1.1/12
PP = (HIGH + LOW + CLOSE) / 3
S1 = C - RANGE * 1.1/12
S2 = C - RANGE * 1.1/6
S3 = C - RANGE * 1.1/4
S4 = C - RANGE * 1.1/2

Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily). C stands for the Closing price.

Camarilla word definition: cam·a·ril·la. A group of confidential, often scheming advisers; a cabal.[Spanish, diminutive of cámara, room, from Late Latin camera. See chamber.]

A quote from Nick Stott who is allegedly the inventor of the Camarilla Equation:
Everyone asks me that. When I first started trading, I thought (as a lot of people do!) that the markets were controlled by a secret 'insiders club' of powerful organizations who manipulated prices for their own benefit. I remember that at the time I was smugly sure that this was so, and was excited to be joining (as I then thought!) this secret 'cabal'. Of course, as I learned more about the markets, I realized that this was nonsense, and that the markets are far too big to be effectively controlled, even by gigantic financial corporations. However, it still looked to me as though there was a pattern in what was supposed to be the 'random walk', a pattern that matched very closely what I imagined a 'secret society' would try to implement in order to maximize their revenues. The obvious conclusion, of course is that if you have enough participants, statistically they start to behave in broadly predictable 'over-ways', and this leads to the patterning that the equation is so good at predicting. The word 'Camarilla' is based on the Latin word for room (camera), and it means basically a small clique of 'advisers' who try to manipulate the person in power for their own ends. Frankly, it was just a joke, and I am always surprised at how seriously everyone took it.

### Why is R1 less that the Pivot Point?

(Or why is S1 above the Pivot Point?)

To understand why this can happen we can use some simple math and the formula above. Let's take a contrived example:

High: 154
Low: 100
Close: 100

The Pivot Point is the average of those three numbers which is: 118.
R1 is R1 = C + RANGE * 1.1/12 which is:
100 + (154 - 100) * 1.1/12 which is 105. (Actually 104.95)

So the closer the Closing Price is to the High or Low and the greater the Range the higher the probability that R1/S1 will be on the "wrong" side of the Pivot Point.