Introduction to Central Pivot Range
If you don’t know how a stock or commodity can perform tomorrow and how to get the best support and resistance for tomorrow’s trading, you have yet to hear about this powerful trading indicator called CPR (Central Pivot Range).
It is a technical tool predicting potential upcoming support and resistance levels. It’s calculated from the previous day’s high, low, and close prices, offering a central pivot point with two accompanying levels, guiding traders in making informed entry and exit decisions.
Table of Contents
What is Central Pivot Range (CPR)
The Central Pivot Range (CPR) is a tool for basic analysis that figures out the day’s most significant levels of support and resistance. It’s based on the previous day’s high, low, and close. It gives the market a centre pivot and two critical surrounding levels to help it make decisions.
In day trading, the Central Pivot Range (CPR) is mostly used to guess important price levels. It has a central pivot point based on the previous day’s high, low, and closing prices. This point is used to predict how prices might change.
The top and bottom pivot ranges are the two extra levels that go around the centre pivot. These could be used as support and resistance zones.
Traders use these three points to plan their starts, exits, and stop-loss orders because they see them as important signs of how the market feels.
How to Interpret CPR?
Reading the pivot points is just as important as having money in your trade account. In pivot levels, the centre pivot, TC (Top centre), and BC (Bottom Central) are the three primary levels to keep an eye on. There are also resistance levels (R1, R2, R3) and support (S1, S2, S3).
Reading the levels Central pivot
In pivot point analysis, the central pivot is the most important number because it shows how the market feels. It represents the average of the high, low, and close prices from the previous trading time. Traders use the center pivot to figure out where possible levels of support and resistance are. This helps them make smart choices.
Focus on the price moments when it is under the 3 pivots line, all the linework as a support and resistance line, and when the price closes beyond the line, the price goes for a sweet rally.
Best Advice
Wait for the candle to close above or below CPR; don’t just take entry after wick crossed the CPR. If you take entry after just wick crossed; it can get you in trouble and give losses and also damage your trading psychology.
Understanding Support (S1) and Resistance (R1)
Traders pay close attention to R1 (Resistance 1) and S1 (Support 1). These are two important levels in pivot point analysis. Above the central pivot point, R1 is the first major level of resistance. When the price approaches R1, it may encounter selling pressure, making it a potential profit-taking zone or a point where the price might reverse downward.
Conversely, S1 is the first major support level below the central pivot point. As the price gets closer to S1, buyers may come in, giving traders who are expecting a rebound a chance to get in.
Understanding and observing R1 and S1 can help traders make informed decisions about entry, exit, and stop-loss placements.
Best Advice
When taking trades in breaking R1 and S1 levels, the best entry you can get is to wait to form a consolidation zone before breaking the level or entry in the re-test phase.
The Virgin CPR Concept
The concept of the Virgin CPR (Central Pivot Range) is a valuable tool for traders seeking to understand market trends and potential price movements. A Virgin CPR occurs when the price has not touched the Central Pivot Range in the previous trading session. This untouched CPR is considered a strong indicator of support or resistance in the current trading session.
Traders often watch for price reactions when it approaches this Virgin CPR, as it can signify significant buying or selling interest. If the price moves towards and respects the Virgin CPR, it often results in a robust directional move, offering traders a clear opportunity to enter or exit positions based on the observed market sentiment.
Trading Strategies Using CPR
Let us look at some popular intraday trading strategies for central pivot range:
Price Breaking the TC level
When the price breaks the above pivot level TC, this shows that the buyers come with more strength than the seller and the market i likely to go upwards from here.
Best Advice
Wait for the candle to close above the TC level with some candlestick patterns that show buyer strength, enter the trade after the candle close and keep the stop loss of Pivot Bc low and a target of R1.
Looks like the price moves when breaking the TC level and hitting the R1 target with SL in the BC pivot low.
Price trading below the BC level
When the price breaks the below pivot level BC, this shows that the sellers come with more strength than the buyers and the market i likely to go downwards from here.
Best Advice
Wait for the candle to close below the BC level with some candlestick patterns that show selling strength, enter the trade after the candle close and keep the stop loss of Pivot TC high and a target of S1.
Looks like the price moves when breaking the BC level and hitting the S1 target with SL in the TC pivot high.
Virgin CPR
A Virgin CPR is commonly regarded as a robust barometer of market sentiment, indicating a significant inclination towards either bullish or bearish activity. A price opening above the CPR indicates a bullish sentiment, while an opening below the CPR indicates a bearish sentiment.
The CPR has opened twice without touching any levels of the prior day, demonstrating the Virgin CPR.
Look how cool the virgin CPR is price is respecting the virgin CPR like a god.
Two CPR within the same area
When a previous day’s CPR and Today’s CPR are parallel to each other, then the market is likely to be neutral, and there are no excellent trades to take.
Best Advice
The best practice in that market is to trade with the previous day’s high and low because the market is likely to stay in the last day’s zone for a day before giving a breakout move.
Wide Range CPR
When today’s CPR overlaps the previous day’s CPR, and there is a good move on the last day, then the best practice to do today is to stay away from that Stock because there is a likely chance that the price stays sideways for today.
Who Invented the Central Pivot Range Indicator?
Technical analyst and seasoned trader Frank Ochoa created the Central Pivot Range (CPR) indicator.
Thanks to his research on pivot points and market analysis, Frank Ochoa, aka “The Pivot Boss,” has made a substantial impact on the trading industry.
Key figures involve
He created the CPR indicator as a tool to assist traders in better understanding market dynamics and identifying possible support and resistance levels as a result of his vast experience in both trading and market observation.
How to Use CPR in TradingView?
Step by step tutorial
Step 1:-
Open tradingview.com into your desktop or for mobile download the apk from google play store.
Step 2:-
Open the Chart on the website or mobile device.
Step 3:-
Go to the indicator option.
Step 4:-
Add this CPR indicator in to your account.
Tips for effective use
For best effective use of CPR indicator go to the setting of that CPR, and de-select all the other option and only select the top 3 option to only show CPR and also change timeframe from monthly CPR to daily CPR for intraday trading.
Advantages of CPR
Beyond only identifying trends, CPR has many benefits that make it an invaluable tool for traders looking for accuracy and insight in their decision-making. The following explains some of the many advantages of CPR.
Accuracy at Entry and Exit Locations
The Central Pivot Range’s (CPR) capacity to give traders exact entry and exit locations is one of its most significant benefits. By examining the high, low, and close prices from the previous day, CPR determines important levels including the upper range, lower range, and central pivot point.
Traders can enter and exit positions quickly by using these levels as strategic reference points. The clarity of CPR might be very helpful for intraday traders when putting up their deals.
Managing Risks Effectively
CPR is essential for improving traders’ risk management tactics. The central pivot point’s upper and lower ranges make it possible to set stop-loss orders at specific levels. By taking a methodical approach to risk management, traders can preserve their cash and prevent possible losses.
When deciding where to set protective stops and when to exit positions, traders may make more educated decisions because to CPR’s accurate assessment of support and resistance levels.
An Understanding of Market Sentiment
The capacity of CPR to provide insights into market sentiment is another benefit. Prices show a bullish trend if they regularly trade above the center pivot point, and a bearish trend if they constantly trade below it.
By comprehending the sentiment of the market, traders can adjust their tactics to suit the current circumstances. They can also modify their strategy in response to changes in the market.
Flexibility Throughout Time Periods
For traders with varied trading techniques, CPR’s flexibility to different time frames is essential. Whether analyzing on a daily, weekly, or Monthly CPR is still a flexible tool.
This guarantees that traders can utilize CPR in a variety of market scenarios and time frames.
Disadvantages of CPR
Here are some disadvantages to CPR:
Sensitivity to Data from the Previous Day
CPR’s dependence on the high, low, and close prices of the previous day is one of its disadvantages.
Because of its reliance on previous data, CPR may not be able to quickly adjust to changes in the market as they occur.
Nature Static
Because CPR calculations rely on set formulas, they are by nature static. This static quality may reduce CPR’s efficacy under quickly shifting market situations. It is important for traders to be aware that CPR levels may not correctly represent sudden changes in market mood, which could cause important support and resistance levels to be misinterpreted.
Restricted in Complicated Market Situations
In extremely complicated market conditions where several factors influence price movements simultaneously, CPR may offer a simplified perspective.
It might not take into account how complicated some market situations are. As a result, it performs less well in situations involving world events or abrupt shifts in investor attitude.
Reliance on a Single Method of Calculation
CPR depends on a particular calculating technique, and the accuracy of this technique determines how effective it is. The fixed CPR formula could need to be appropriately adjusted when new trends or changes in market dynamics occur, which could result in incorrect interpretations of market trends.
How Does CPR Differ from Traditional Pivot Points?
In contrast to typical pivot points, the Central Pivot Range (CPR) offers a unique methodology that gives traders a more thorough tool for analyzing market movements. The main variations are as follows:
CPR:
Comprises three levels—the Central Pivot (CP), Top Central (TC), and Bottom Central (BC) pivots. This range helps traders identify a more nuanced area of potential support and resistance, rather than just a single point.
Traditional Pivot Points:
Consist of a central pivot point and additional support (S1, S2, S3) and resistance (R1, R2, R3) levels. Each of these levels is a single point rather than a range.
Market Sentiment
CPR:
The range provides a broader zone for traders to assess market sentiment. When prices remain within the CPR, it indicates market consolidation. A breakout above or below the CPR can signal a stronger bullish or bearish sentiment.
Traditional Pivot Points:
Offer specific points where price reversals or continuations are likely. Traders look at these individual levels for potential entry or exit points based on how the price interacts with them.
How Accurate is the Central Pivot Range?
The accuracy of the CPR in predicting market movements can be significant, but it is important to recognize that no indicator guarantees precise predictions. The CPR provides a framework for understanding market dynamics by outlining key levels of support and resistance within a range.
Is CPR a Leading Indicator?
Yes, CPR is a leading indicator because the level does not change with changes in the price. The level remains static all days, despite the price move; on the other hand, many indicators like Macd, RSI, and Moving average lagging indicator because they change by changes in price, and it does not remain static all days.
R2, R3 and S2, S3 in Pivot Points
I dont things you know, but there are more levels than R3 and S3. Many traders use R5 and S5 also.
R4, R5 Levels in trading
However, I suggest you only stick with S3, 3 levels because there is significantly less chance that the price can touch R4 or S4.
It can happen when there is big news in the market of some long-term breakout; it only happens a few days in a year, and for a few days, I dont recommend to use R4, S4.
Best Traders Who Use CPR
Worldwide popular trader
The best trader you can follow to learn CPR trading is Frank Ochoa. He has written a great book on CPR trading, and he also sells his online courses on his website.
In India the best CPR trader
The top trader I suggest from india is Ashwani Gujral.
He also wrote a book on intraday CPR trading named How to Make Money in Intraday Trading; this book gives you deep knowledge of CPR trading with how to trade new stock and analyse higher timeframe pivots.
Best CPR trader in Youtube
If you want to learn CPR trading for free from YouTube, watch the Pivot Call YouTube channel.
He trades only with CPR, and you will find many different price patterns that work in nifty and bank nifty.
Thank to read this article.
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