CPR - Central Pivot Range? How to use it?
The Central Pivot Range (CPR) is an indicator to identify key price points to set up trades. CPR is especially useful for intraday trading.
The CPR consists of three components –
- Pivot. (High + Low + Close)/3
- Bottom Central Pivot (BC). (High + Low)/ 2
- Top Central Pivot (TC). (Pivot – BC) + Pivot
The CPR helps the trader identify key price points and the trend reversals around these price points.
15-minute chart is the usually prefered time frame for Intraday using CPR
Width of the CPR varies, In a range bond market, the next days CPR is narrow, as high and low price were close to each other. In a trending market, the next day’s CPR is wide, higher the rally, wider the CPR.
How to use CPR?
- Bullish above the TOP line ie..the TOP CENTRAL PIVOT. (TC)
- Bearish below the BOTTOM line ie.. the BOTTOM CENTRAL PIVOT (BC)
CPR is the simplest way of representing the Bulls and Bears in the Stock.
- When the stock price is higher than TC, the TC now acts as a support line. We can go long on a stock when the price retraces back to the TC line.
- One can trade within the CPR. Trading while the stock price is within the CPR is like a range trade. Buy at BC with Topline as Target and Sell at TC with the bottom line as a target.
- When the stock price is lower than BC, the BC will act as a resistance line. Look for a price pull back to the BC line before initiating a fresh short.
My advice is to avoid the Rangebound trade within the CPR and use CPR for Breakouts and Pulls backs only
Key Takeaways about CPR from Zerodha's Varsity
- You can trade from the chart by selecting the trade button
- The trade button is a floating window which you can place anywhere on the chart
- The candle pattern helps identify the candlestick patterns, use this to reconfirm the pattern
- CPR helps you identify the S&R pattern
- It is considered bullish if the current market price is higher than the TC line
- It is considered bearish if the current market price below the BC line