Description
The CPR (Central Pivot Range) is an advanced Pivot indicator that provides technical support for daily price-level analysis.
Using Pivot points for determining short-term support/resistance levels is a widely popular strategy among forex and stocks day traders. It outlines crucial event areas of the market where the price decides its next movement direction.
Technically, CPR works in a similar fashion to the original pivot points indicator. But it brings a new idea of identifying the critical price levels by using top, bottom, and central pivot points on the chart. Moreover, it also demonstrates a series of S/R lines based on daily, weekly, and monthly price actions.
However, like most pivot indicators, CPR doesn’t generate straight buy/sell signals. It only outlines the potential areas where you might encounter interesting changes in supply/demand of an asset and convert them into trading opportunities. Therefore, a basic understanding of candlestick patterns might help you anticipating highly probable trade signals at key price levels.
How the CPR indicator works and how to use them to determine the buy-sell levels?
The CPR comprises three pivot levels ﹘ central pivot (PV), top central pivot (TC), and bottom central pivot (BC).
The central pivot helps you to assess the bullish/bearish sentiment of the price. For instance, the price holding its position below the central pivot level indicates a bearish momentum. At this point, you may prepare yourself in advance for a possible upcoming sell opportunity.
Both TC and BC levels help you determine in which direction the price is heading based on the current market sentiment. For example, the price turns higher than TC means the asset is under immense buy pressure and most likely to move north. So, triggering a buy order in this situation could enable you to get the maximum benefit from the current bullish momentum.
Furthermore, CPR plots a series of support and resistance lines surrounding the central pivot level, which you may use to anticipate profit targets and stop-loss positions.
