Pivot points are one of the most elementary yet powerful indicators used in Technical analysis. It is comprised of a pivot line surrounded by a series of support and resistance levels which helps in speculating the price movements. There are several different flavors of pivot points used by price action traders, but the one that is drawing mass attention is Central Pivot Range or CPR Indicator.
In this post, we’ll learn the fundamentals of CPR, its calculation, usage, and examples. Let’s get started.
What is Central Pivot Range (CPR)?
Central Pivot Range is a versatile technical indicator usually comprising of 3 levels – a central pivot point (pivot), top central level (TC), and bottom central level (BC).
The calculation of the levels is very simple:
TC = (Pivot – BC) + Pivot
Pivot = (High + Low + Close)/3
BC = (High + Low)/2
As you can see from the above CPR formula, all the 3 levels are calculated using just 3 variables, High, Low, and Close price. When you add CPR levels in a stock’s chart, TC is highest, the pivot is at the center and BC is the lowest level. However, depending on market conditions TC’s value may be lower than BC. Irrespective of the calculation, the highest of the 3 values is typically termed as TC and the lowest is BC.
The fundamental idea behind this indicator is that the particular day’s trading range captures everything about the market sentiment, and hence this range can be used to predict the price movement of the following days.
The previous day’s high, low, and close prices are used to calculate the CPR levels for the current day. And these levels remain constant throughout the day.
This indicator was first introduced by Mark Fisher in this book “The Logical Trader”. Frank Ochoa added another dimension, central pivot point to this indicator.
As per Frank,
CPR is the Swiss Army Knife of pivots, and Like the Moon, the central pivot range controls the tides of the market
How does CPR differ from traditional Pivot Points?
The traditional pivot points generally have one central pivot line surrounded by support and resistance levels.
However, CPR consists of 3 levels, a central pivot point (pivot), top central level (TC), and bottom central level (BC). Surrounding these 3 levels are the usual support and resistance lines as shown below:
If the price levels for a particular timeframe do not touch the CPR levels of the same timeframe, then that CPR is known as Virgin CPR.
Look at the below chart example where blue dotted lines indicate CPR levels, and none of the price candles touch these levels.
There is a 30-40% probability that the price would not touch the CPR levels for a given day
Virgin CPR can be used as very strong support or resistance level that we’ll learn further in this article.
CPR Interpretation – How to use it for Trading?
There are a variety of ways you can use CPR indicator for your trading decisions. Below we have summarized the important ones:
Any breakout above or below the TC and BC lines respectively indicates a high probability that the movement will continue. And if the breakout candle has higher volume than the preceding candles, than it gives an extra confirmation.
The width of the CPR lines very accurately gives an idea of the expected price movement. If CPR width is narrow, that is the distance between TC and BC lines of CPR is very low, then it indicates a trending market.
While if the distance between TC and BC lines is relatively higher it indicates sideways market.
CPR as Support and Resistance
CPR lines can also act as support and resistance. When used judiciously, it can help you decide your stop loss level. Any of the 3 CPR lines can be used for this purpose.
Interpreting overall trend through CPR
If the CPR lines form higher high every day and look like an upward ladder, then it indicates strong bullishness.
While, if the CPR formation is like a downward ladder, then the market is probably bearish.
Trade using Virgin CPR Indicator
Virgin CPR levels of the previous day acts like a very strong support or resistance point. So, if the price touches the previous day’s virgin CPR level, it may bounce back very sharply in the opposite direction.
Timeframe to use CPR
In general, CPR levels are calculated based on the daily timeframe and used in an intraday timeframe. All the preceding examples in this article are on the same logic.
But CPR indicator works equally well in higher timeframes too. If you trade on the EOD timeframe, then CPR should be calculated based on weekly price levels. The same can be extended to any timeframe.
The underlying principle is that the CPR is calculated on a timeframe higher than where it is used for trading.
CPR Indicator in TradingView Charts
There are several versions of the CPR indicator available in TradingView currently. The one that we would recommend is Pivot Points CPR with M, W, D High Low by GomathiShankar.
Please note that it is not a built-in indicator present in Trading View, it is available in the public library free of cost.
CPR Indicator Accuracy for Intraday Trading
We found the CPR indicator to be highly accurate in the intraday timeframe. It’s recommended to use it in a 5-minute chart for high beta stocks or indices.
If you trade based on CPR breakout with volume confirmation, the success rate can be as high as 70%. But don’t forget to put a stop loss to save your capital from unexpected moves. As a general rule, you can use one of the CPR levels as a stop loss. For example, if you BUY as stock based on TC breakout, then the BC line can be your stoploss. If the CPR width is very narrow you can even look at the previous day’s CPR levels as a stop loss.
Like everything else in technical analysis, CPR also is not a holy grail. You can only succeed with proper position sizing and risk management.
Please follow the below link to get access to a fully automated CPR spreadsheet:
Using this sheet, you can calculate CPR as well as support/resistance levels for any symbol of your choice.
CPR AFL Code
Download the Amibroker AFL code for CPR from the below link:
Using this AFL code, you can view the CPR levels of all the stocks from your watchlist, and also you can scan for narrow range stocks.