What is so special about this variation of CPR is that it combines three indicators together. It has Central Range to understand market trend and for taking entry; Stop line to identify the stop loss for any trade keeping in view of the instrument; and Standard for profit targets. So overall it combines all essential ingredients for trading in a single indicator.
While CPR and values will remain fixed, the ATR period and multiple can be changed.
Central Range: is a useful intraday technical indicator which comprises 3 levels – a Central ( ), Top central level ( TC ), and Bottom central level ( BC ).
These levels are calculated as follows:
TC = ( – BC ) +
= (High + Low + Close)/3
BC = (High + Low)/2
The 3 levels are calculated using 3 variables, High, Low, and Close price. When you add CPR levels in a stock’s chart, TC is highest, the is at the center and BC is the lowest level. However, depending on market conditions TC’s value may be lower than 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.
This indicator was first introduced by Mark Fisher in this book “The Logical Trader”. Frank Ochoa added another dimension, central to this indicator.
Any high breakout above or below the TC and BC lines respectively indicates a high probability that the movement will continue.
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 . Market may takes support or resistance at the CPR and reverse.
ATR Stop: I am adding another useful indicator known as ATR stop with CPR . Once market takes at the CPR , trade can be taken with stoploss under/above (as the case may be) the ATR stop line. It would help in absorbing the intraday in a stock or instrument.
Pivot Points: can be taken as target points where partial or full profit (depending upon market conditions and momentum) can be taken.
I hope this indicator would help some traders in taking better trading decisions.
I ll keep on sharing live analysis time to time.