The Central Pivot Range (CPR) is a technical analysis indicator, not a static "range" in the traditional sense of a high and low value. Instead, it consists of three key levels calculated from the previous day's high, low, and close prices: the Pivot Point (P), the Bottom Central (BC), and the Top Central (TC). Understanding these components helps determine potential support and resistance levels for the current trading day.
Here's a breakdown of the CPR components:
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Pivot Point (P): Calculated as (High + Low + Close) / 3. This is the primary level and often acts as a significant point of support or resistance.
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Bottom Central (BC): Calculated as (High + Low) / 2.
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Top Central (TC): Calculated as (Pivot - BC) + Pivot, or alternatively, (2 * Pivot) - BC.
The "CPR range" refers to the distance between the Top Central (TC) and the Bottom Central (BC). The width of this range is crucial. A narrow CPR range suggests a potentially trending market, while a wider range suggests a sideways or range-bound market.
How the CPR Range is Used in Trading:
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Identifying Support and Resistance: The CPR levels themselves act as potential support and resistance.
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Trend Identification: A narrow CPR often precedes a strong trend. Traders look for price breakouts above or below the CPR to confirm the trend direction.
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Range-Bound Market Indication: A wide CPR suggests a range-bound market, where price may oscillate between the TC and BC levels.
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Confirmation with Other Indicators: CPR is often used in conjunction with other technical indicators (e.g., moving averages, RSI, volume analysis) to confirm trading signals.
In summary, the CPR "range" isn't a fixed set of numbers, but rather the calculated levels of TC and BC that, combined with the Pivot, give insight into possible support, resistance, and potential market trends for the current trading day. The width of the TC to BC range is a key factor in analysis.
