One of the most popular scalping systems uses the indicator called Camarilla. Camarilla was created in 1989 by Nick Stott - a successful bond trader in the financial markets and after a short time became popular among professionals trading S&P and Forex. Camarilla Indicator creates special intraday levels and involves you in intraday trading both with and against the trend.

Camarilla Levels are calculated using the following formulas:

H4 = [1.1*(H-L)/2]+C
H3 = [1.1*(H-L)/4]+C
H2 = [1.1*(H-L)/6]+C
H1 = [1.1*(H-L)/12]+C

L1 = C-[1.1*(H-L)/12]
L2 = C-[1.1*(H-L)/6]
L3 = C-[1.1*(H-L)/4]
L4 = C-[1.1*(H-L)/2]

Where:
H = previous day’s high
L = previous day’s low
C = previous day’s Close

This calculation gives you 8 levels of intraday support and resistance. There are 4 of these levels above yesterday's close, and 4 below as shown below.

There are three traditional ways to use Camarilla:

1. If Market opens INSIDE the L3/H3 levels, you must wait for price to approach either of these two levels. If the higher H3 is hit, go short against the intraday trend in the expectation that the market is going to reverse. Protective stop is above H4. If the Lower L3 level is hit first - go long against the trend. Protective stop is below L4.

2. Market Opens OUTSIDE L3/H3. In this case, you wait for the market to retreat back through the L3/H3 level. Then you sell below H3 or buy above L3 using L4/H4 levels act as you stop loss. In this case you will be trading with the intraday trend.

3. Look at L4/H4 levels to be breached, which would signal of an initiation of the sharp directional intraday market move. It means that you are going LONG if price penetrates UP through the higher H4 level, or going SHORT if price penetrates DOWN through the lower L4 level.

Some researchers of this method of trading claim that the reversals from L3 and H3 happen as often as 4 times out of 5 during intraday trading.
Many trader consider useful to combine Camarilla with the Pivot Levels. Such combination is supposed to reveal more reliable intraday structure of price levels suitable for aggressive intraday scalpers.

Traders using Metatrader Platform can find very useful the indicator SDX-TzPivots created by Shimodax. It contains Camarilla, Pivot Points, Fibos and some other interesting features for automated calculation and drawing levels. Download SDX-TzPivots Indicator and read how to set Camarilla up.