What is the Central Pivot Range Indicator?
The Central Pivot Range (CPR) indicator is a technical analysis tool that is used to identify possible support and resistance levels in the market. It is calculated using the previous day’s closing price, high, and low prices. The CPR indicator has three levels:
Pivot point: The pivot point is the middle level of the CPR range. It is calculated by averaging the previous day’s closing price, high, and low prices.
Top central pivot point (TCP): The TCP is the upper level of the CPR range. It is calculated by adding the pivot point to two times the distance between the pivot point and the previous day’s low price.
Bottom central pivot point (BCP): The BCP is the lower level of the CPR range. It is calculated by subtracting the pivot point from two times the distance between the pivot point and the previous day’s high price.
The CPR indicator can be used to identify potential entry and exit points for trades. For example, if a trader believes that the market is bullish, they may look to buy when the price breaks above the TCP. Conversely, if a trader believes that the market is bearish, they may look to sell when the price breaks below the BCP.
The CPR indicator can also be used to set stop-loss orders. For example, a trader may set a stop-loss order below the BCP if they are long the market. This will protect them from losses if the market turns bearish and the price breaks below the BCP.
How to Use the Central Pivot Range Indicator
The CPR indicator is a versatile tool that can be used in a variety of ways. Here are a few basic strategies for using the CPR indicator:
Breakout trading: This strategy involves looking for the price to break above the TCP or below the BCP. If the price breaks above the TCP, it is a sign of strength and the trader may look to buy. Conversely, if the price breaks below the BCP, it is a sign of weakness and the trader may look to sell.
Range trading: This strategy involves looking for the price to stay within the CPR range. If the price stays within the range, it is a sign of consolidation and the trader may look to enter a position if they believe the market is about to break out of the range.
Support and resistance trading: The CPR indicator can also be used to identify support and resistance levels. If the price repeatedly bounces off the TCP or BCP, it is a sign that these levels are important. The trader may look to enter a position when the price breaks through these levels.
The CPR indicator is a powerful tool that can be used to improve your trading results. However, it is important to remember that no indicator is perfect. It is always important to use the CPR indicator in conjunction with other technical analysis tools and your own judgment.
Conclusion
The Central Pivot Range indicator is a versatile tool that can be used to identify possible support and resistance levels, as well as potential entry and exit points for trades. It is a relatively easy indicator to use and can be applied to a variety of financial markets.
However, it is important to remember that no indicator is perfect and the CPR indicator should be used in conjunction with other technical analysis tools and your own judgment.