Can you currently envision market trends at all? If you’re an intraday or swing trader, you have probably encountered scenarios where the prices act mysteriously, putting you in total perplexity. Central Pivot Range (CPR) seems to be the best way that traders can accurately trade their way through price action.
CPR is the one that indicates the price first and not the one that does it after giving us the assistant of sure support and resistance levels, like the other indicators. A lot of traders affirm that the CPR trading strategies are the ones to determine breakouts, reversals, and trend continuations.
This guide will enable you to decipher the trading cues of CPR, ascertain its values, and put together a well-planned system to enhance your gains and mitigate any unexpected losses.
Understanding the Concept of CPR
In This article, we will explain the distinctions between CPR and traditional pivot points as a basis for understanding the strategies.
Components of Central Pivot Range
CPR is made of three levels:
- Pivot Point (PP): The pivot point is a central line where the reference for the market trend is established.
- Top CPR Line (TC): The top level of CPR acts as a resistance in the market.
- Bottom CPR Line (BC): The bottom level of the CPR acts as a support in the market.
The range separating TC and BC is a measure of market volatility:
- Narrower CPR → Indicates breakout opportunities.
- Wider CPR → suggests a range-bound market with minimal price fluctuation.
How CPR Assists in Price Action Trading
CPR is one of the primary benefits in trading as it can be a dynamic support and resistance level. It is a more reliable tool than a static support/resistance line, as it goes with the price, and thus, moves, paces, and leads.
How Traders Use CPR in Market Analysis
- If the price is opening above CPR, it signals the bullish trend and traders are interested in buying the market.
- If the price is lower than CPR, it is anticipated to be a bear market, and thus traders are more inclined to sell the stock.
- The price sits beside the CPR level, which is in a narrow trading range and market participants kill time waiting for an eventual breakout to take place.
The CPR strategy is a strong tool in that it enables you to forecast market trends irrespective of the use of lagging indicators such as moving averages.
Types of CPR and Market Trends
1. Narrow CPR – The Breakout Signal
- Narrow CPR simply means the distance between TC and BC is minor.
- It is the market that is busy with the building of energy reserves for the near future big move.
- Breakout traders will be preparing their strategies for both up and down.
2. Wide CPR – The Range-Bound Market
- A wide CPR in general speaks to low volatility which means the market is in a consolidation supports one’s claim that a calm laboriously moving trading environment may be the case.
- It is proper that trades should focus on strategies that rely on ranges and squares and let the settlements remain more active.
How to Calculate Central Pivot Range (CPR)
To calculate CPR, the formula is given as follows:
- Pivot Point (PP) = High + Low + Close / 3
- Top CPR Line (TC) = Pivot + High / 2
- Bottom CPR Line(BC) = Pivot + Low / 2
Example Calculation:
Let’s suppose that yesterday the stock had the following values:
- High: ₹250
- Low: ₹230
- Close: ₹240
By using the formulas:
- PP = (250 + 230 + 240) / 3 = ₹240
- TC = (240 + 250) / 2 = ₹245
- BC = (240 + 230) / 2 = ₹235
These prices are the levels as reference points for today’s trading session.
CPR Trading Strategy for Beginners
If the first time using CPR in trading, strictly adhere to the following step-by-step strategy:
1. Identify the Trend:
- If the price rises at CPR, then look for the opportunity to buy.
- The price comes on CPR to start with. A trader should focus on selling after.
2. Use CPR as Support & Resistance:
- In case the stock finds support at CPR and goes up, this is a bullish signal.
- In the event the stock rejects CPR and falls, this is a bearish signal.
3. Confirm with Volume:
- A breakout above CPR with high volume is a strong buy signal.
- The breakdown under the CPR level of trading done with high volume is hard to sell.
Advanced CPR Trading Strategy for Experienced Traders
The CPR strategy is used by experienced traders to improve the trade setup using other indicators.
1. Combining CPR with Moving Averages
- The CPR with the 50-day moving average is the major tool to support the direction of the price movement.
- Above CPR + Moving Averages Up = Strong Uptrend
- Below CPR + Moving Averages Down = Strong Downtrend
2. Using CPR with VWAP (Volume Weighted Average Price)
- If the price stays above VWAP and CPR, it implies an uptrend bullish sway as confirmed by it.
- If the price stays below VWAP and CPR, then the downtrend bearish sway has been maintained.
3. RSI + CPR for Overbought and Oversold Zones
- When the RSI reading is over 70 and the price is sitting on the top, it is signalling that it is possible to have a reversal.
- A bounded bottom of the RSI below 30 with a bound to the bottom of the price to CPR, you would expect a bounce up.
CPR vs. Traditional Pivot Points
| Feature | Central Pivot Range (CPR) | Traditional Pivot Points |
| Usage | Intraday & Swing Trading | Mostly Intraday |
| Predictive Power | Higher | Moderate |
| Components | 3 (PP, TC, BC) | 7 (PP, S1-S3, R1-R3) |
| Accuracy | More Reliable | Less Reliable |
CPR is much less sensitive to price action which is why it has become the preferred trading tool among lots of traders.
Case Study: Successful CPR Trading Example
Stock: Infosys (NSE: INFY)
- CPR would not display a wider range.
- The stock opened above the CPR. It then began a bullish candle formation.
- Following a really strong breakout above Top CPR, the stock went up by 10% in one day only.
This encapsulates the reason why traders have been using CPR trading as the main strategy for the breakout.
Common Mistakes to Avoid When Trading with CPR
✖ Ignoring Volume Confirmation
✔ Always check the volume strength of a trade before entering it.
✖ Trading CPR Without Market Trend Analysis
✔ To make sure that CPR’s trading strategy corresponds with the movement of the market.
✖ Expecting CPR to Work 100% of the Time
✔ There is no such strategy that is the same as the ideal one – use stop losses always.
FAQs
What is CPR in trading, and why is it important?
CPR is a forecasting tool that is used to forecast price movement by traders and can be used for breakouts.
How is CPR calculated?
The calculator adds the previous day’s high, low, and close values together.
Can I use the CPR trading strategy for options trading?
CPR can be used to trade options, especially the ones around the ATM.
How do I know if a CPR trade will be successful?
Confirm that the volume of the trending direction is in your favor and the other indicators are also signaling the same.
What platforms support CPR indicators?
It is widely available on Zerodha, Upstox, Paytm Money, and Alice Blue platforms.
Conclusion
Implementing the CPR trading strategy will certainly help to upgrade your trading results. Regardless of whether you are a novice or a seasoned trader, the CPR method in trading enables you to detect trends early, sidetrack fake breakouts, and boost precision.
Begin implementing the CPR method now and push your trading expertise to a higher degree!
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