3# Trading Breakouts with the Camarilla Equation Trading System
Submit by Aurora trader 15\04\2011
The L4 levels, although used initially as 'stoploss' levels for reversal trades off the L3 levels, are actually phenomenally good 'breakout' levels themselves. If price pushes up thru the higher L4 level, the chances are it is going to keep on running that way. Our own research indicates that in such a breakout on the S&P, a move of up to 7 points can be expected, which is, as you will understand, a VERY significant proportion of a typical day's volatility.
Running with the breakout
As the equation specified no levels outside L4, knowing when to exit the trade becomes highly subjective. Taking profitshere might often be a prudent course of action, as once your money is off the table, the worst that can happen is that you earn some interest on it! Stoplosses, of course are also subjective - we find on the S&P that 2 points or less is usually sufficient.
In this example from the FTSE (The UK equivalent of the S&P) on 1st July 2003, the breakout is clearly signposted downwards, as is the suggested profit target.
This particular breakout uses the levels from the version of the equation,which usually correspond quite well to L4.