Understanding the Central Pivot Range (CPR)

The Central Pivot Range (CPR) is a technical indicator used to identify potential support and resistance levels in the financial markets. It is derived from the central pivot point and can help traders understand price dynamics and market sentiment.

What is the Central Pivot Range (CPR)?

The CPR consists of a central pivot point and two additional pivot levels that form a range, providing insights into potential price reversals and market conditions. The central pivot point is calculated from the average of the high, low, and close prices, while the additional levels are derived from this central pivot.

How is the Central Pivot Range Calculated?

The calculation of the CPR involves three main levels:

1. Central Pivot Point (CPP):

   • CPP = (High + Low + Close) / 3

2. Top Pivot Point (TPP):

   • TPP = CPP + (High - Low)

3. Bottom Pivot Point (BPP):

   • BPP = CPP - (High - Low)

These levels help identify potential support and resistance areas.

Formula

The formulas for the CPR levels are:

CPP = (High + Low + Close) / 3
TPP = CPP + (High - Low)
BPP = CPP - (High - Low)

Where:

• High: The highest price of the period.
• Low: The lowest price of the period.
• Close: The closing price of the period.
• CPP: Central Pivot Point.
• TPP: Top Pivot Point.
• BPP: Bottom Pivot Point.

Uses of Central Pivot Range

The CPR is useful for:

1. Support and Resistance Identification

• Potential Reversal Points: The pivot points can act as potential support and resistance levels where price reversals may occur.

2. Market Sentiment

• Price Range Analysis: Helps traders gauge market sentiment by analyzing the price movements relative to the pivot levels.

Parameters

Here are the key parameters for configuring the Central Pivot Range:

• Data Offset (pod):

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Defines the number of periods used for calculation.

• Data Type (data):

  • Default Value: hlc (high low close)
  • Options: hlc (high low close)
  • Description: Specifies the data used for the calculation.

• Data Point (dataPoint):

  • Default Value: 1
  • Options: 1 (Pivot Points), 2 (Bottom Pivots), 3 (Top Pivots), 4 (Resistance 1), 5 (Resistance 2), 6 (Resistance 3), 7 (Support 1), 8 (Support 2), 9 (Support 3)
  • Description: Specifies which pivot levels to use for analysis.

Advantages of Central Pivot Range

• Clear Support/Resistance Levels: Provides clear levels for potential support and resistance.
• Market Insight: Offers insight into potential price movements and market sentiment.

Limitations of Central Pivot Range

• Static Levels: Pivot points may become less relevant in highly volatile or trending markets.
• Lagging Indicator: May not predict sudden market changes effectively.

Conclusion

The Central Pivot Range is a valuable tool for traders seeking to identify key support and resistance levels. By analyzing the central pivot point and additional pivot levels, traders can gain insights into potential price reversals and market conditions, aiding in more informed trading decisions.