Follow
Subscription Form
CPR Indicator

How to Trade using the Central Pivot Range (CPR Indicator)

Here is the complete guide to the Central Pivot Range indicator. Understand what the CPR Indicator is, and learn to use it for Trading in capital markets.

The Complete Guide to Central Pivot Range (CPR Indicator)

If you ask me about my trading setup, I will tell you about the CPR Indicator. The central pivot range is an essential part of my trading setup, and it highly influences my trading decisions.

The moment you start learning about technical analysis, you hear the term pivot points more often, and thats because pivot points are the most potent yet essential indicator used in technical analysis. See the image below; It has the pivot point P and 3 Support and Resistance pivot points at either side of the pivot point.

f kedGMI7kjCBo H1aF Z81SYULwqTHWbYMH 1y7aKM OSIfcFmq1J5PmP1Sonvrvvwak9ndRpkjW4E 74vy

Endless possibilities are using the pivot points setup, but the one getting the most attention is the central pivot range or CPR Indicator.

So What is Central Pivot Range(CPR)?

The Central Pivot Range (CPR) is an indicator to identify key price points to set up trades. CPR is beneficial for intraday trading. 

The pivot point is the center or average of prices and is calculated by adding days low, high, and close levels and dividing them by three. 

Pivot Point = Previous Day (Low+high+close)/3

As the name suggests, the CPR gives us an upper and lower range from the pivot point. For CPR, we need two more points. 

  1. Top Center Pivot
  2. Bottom Center Pivot

So when you apply CPR, you get three lines, Let’s have a look.

oPBNSGQxHi LUAeInZQN0ZW05WI6jUoGWkhjOzM63yYZScIjVtOK7gOa2QpoikeJGcuSqzMZbePEqMFU4XNf2nfGrWEblhQAWXvh7X7hgwEj5n9vbjVj Kker5AnpF2cP8VYc4hC

The calculation of the other two points is simple: finding a point-1 by adding high and low and dividing them by 2. Next, calculate point-2 by deducting point-1 from the pivot and then adding a pivot value. 

So point-1 = (High+Low)/2

Point-2 = (Pivot – Point-1)+Pivot

Now keep the highest value of this point is Top Central Pivot and the other one as a Bottom center Pivot.

You don’t have to worry about calculation with current high-tech charting solutions, as it is available as an indicator. 

M62ScRpKicgMpUQJPbNfBtBIFVZLLE4r9llgrqVpALb7XgpdIaDXdQ5rVNiLV3dzAhHugbU1Hi2JXKUEneyANeimSid7en1W hFZWFCY0FOpUEKch4Wkq8eIw87AgmeVC8PFEsk

In short, CPR gives us previous days’ trading range. The idea behind the CPR indicator is that the previous day’s trading range captures everything about the market sentiment. Hence, We can use the CPR to predict price movements in the upcoming days. 

The previous day’s high, low and close are used to calculate the CPR for today, and the values remain constant throughout the day.

Mark Fisher gave the first reference to the CPR indicator in his book “The Logical Trader.”As per Frank Ochoa, “CPR is the swiss army knife of pivots, and like the moon, the central pivot range controls the tides of the market.”

How to interpret the CPR?

Let me tell you some essentials, Things that will help you interpret the market using CPR.

Vergin CPR

If any given day the price does not touch the CPR, the CPR be called virgin CPR. 

emJHXVVedgfiIpfzL2mQ1aKnUGVe8o2Uqtwy O2EGHSbL XuWcgVYIrsycuCEtksdpAfluSpNDDiplhYGtWW jDXvjBimTYlqrWuIEb7KRhVAwks2rdqeKqNwoviWtyFMpKId96j

See the chart. The three blue lines are CPR, and you can see the price failed to touch that range for a day, So the next day, there is a  40-50% chance that the price will fail to break that range. 

The virgin CPR can act as strong support or resistance depending on the market scenario.

Price trading above the Top Central Pivot Point

From a price action perspective, when the current market price is higher than the TC, the traders are willing to buy even though the average price is higher.  Hence, it would help if you are looking for buying opportunities. Remember, when CMP is higher than TC, the CPR now acts as a Support.

Price Trading below the Bottom Center Pivot

The stock or the index is trading lesser than the “Bottom Central Pivot’ (BC). When the current market price is less than three, it implies bearishness, looking for selling opportunities.

Also, the CPR or The bottom center pivot is now acting as a resistance. Have a look at a given image. When the price breaks the CPR and starts trading below the BC, the BC acts as a resistance level.

8GDAfi kdB0e7VgYdwCCk1efznJ8QUw1ntpgzCvtmSZ9cKOAOxtsI0PmkH1B2w6MziUHAgIqAof2AL9oaf E

Price trading within the CPR

Some people love to trade at a sideways market, and price within the CPR is an Indication of a sideways market, or we can say an accumulation phase.

pghtreAfHIPi6duvg4ht1lGwVh7tIFopdS lCza6d77nopOOaoYqL

You can trade this by waiting for a breakout above TC with volume, or in case of wide CPR, you can buy at BC and keep target TC and sell at TC by keeping target BC. But I like the breakout ones more.

CPR Width

Usually, I consider three widths for CPR, Medium, Narrow, and wide. The width of the CPR depends on the market movement. If the previous day were a trending day, today’s CPR would be Wide; if the previous day is sideways, then today’s CPR will be narrow. The medium is kind of in-between narrow and wide. See the image below, and I have found some points in my study.

  1. As you can see, the sideways day gives narrow CPR, which can be a trending day for the market.
  2. With medium CPR, the chances of the market being sideways are high.
  3. The wide CPR is difficult to break through, hence acts as solid support or resistance.

CPR Breakouts

Breakouts are my favorite kind of trades. With CPR, you can look for breakout trades when the price breaks below BC or Above TC with high volume confirmation.

ZKoiLQPm9eWxH nR8NiFeQN iPnyM LfakJLeUK2cfviMTrptimrDLLBn7vKazcn8j5w Cme9kSRte4lpzSp onqYeKE JnsWHlc4QC633wl9J1ZeZIz2hwd0mLU gXAGMgR4BS

See the above example of breakout. Mark my words “CPR is a wall, and it can only be broken by momentum and volume. A breakout is only when the high volume on that side supports it; otherwise, stay away. It’s a trap.

Note: The medium-width CPR gives good breakout trades.

CPR Pullbacks

As I have told earlier, the CPR acts as solid support and resistance, and Breakout can only happen with volume. You can trade CPR pullbacks with high accuracy by keeping an eye on volume.

4VnNlUBDfT3Xe 7uANK n4K7lYKEO1z4DhNohEOTdKLcB1cggAVXztMBHnEnLykQ37Rfbx9sgbD wNJnIBxFMgWk3fhj8hxGVbX6DY5gytdcX742g9DDFSoN96M555w 2gUf81mB

CPR Time Frame

The high accuracy comes while plotting intraday CPR, But CPR can Also be plotted weekly and daily. The rule is to calculate CPR on a timeframe higher than where it is used for trading.
For a daily timeframe, use weekly OHLC, and For a Weekly timeframe, use Monthly OHLC values.

CPR Indicator Accuracy

Nothing works 100% of the time in the market, so anything above 50% is good if you keep an excellent risk-reward ratio.

I have been trading with CPR and price action for a long time, and I can say it works around 70-80% of the time if your plan is good. Just check for yourself!!!!! Happy Trading!!

Total
1
Shares
Previous Article
20 Best Vodka in India of All Time

20 Best Vodka in India for All Time.

Next Article
skoda kushaq

All-New 2021 Skoda Kushaq - Experience the Premium Quality

Total
1
Share