How are the pivot points derived while using the Central Pivot Range (CPR)?
The Central Pivot Range (CPR) is an indicator to identify key price points to set up trades. CPR is mostly used for intraday trading.
The CPR consists of three components:
- Bottom Central Pivot (BC)
- Top Central Pivot (TC)
These are derived out of the underlying High, Low, and Close calculations:
- Pivot = (High + Low + Close)/3
- Bottom CPR = (High + Low)/ 2
- Top CPR = (Pivot – BC) + Pivot
When you open an intraday chart, the charting engine will only have the intraday data points historically. It won’t have daily data points. So, accordingly, to find the previous day OHLC, the intraday chart will look at all the candles on the previous day and then take these points.
For instance, if the previous day’s high, low and close is 16610, 16486.45 and 16602.2 respectively. By Considering the above method this is how the points will be calculated.
- Pivot = (16610+16486.45+16602.2) / 3 = 16566.22
- Bottom CPR = (16610 +16486.45) / 2 = 16548.23
- Top CPR = (16566.22- 16548.23) + 16566.22 = 16584.21
The CPR helps the trader identify key price points and the associated trend around these price points. Today’s CPR values act as the reference for tomorrow’s trading.
You can learn more about CPR in this Varsity Module.