What is Central Pivot Range or CPR?

The Central Pivot Range (CPR) is a technical analysis indicator used in financial trading. It is also known as the Pivot Point Range or Daily Pivot Range. CPR is a set of levels that are calculated based on the previous day’s trading range, and it helps traders determine potential support and resistance levels for the current trading day.

To calculate the CPR, you need to determine the Pivot Point (PP), which is the average of the previous day’s high, low, and close prices. The CPR consists of three components –

1. Pivot
2. Bottom Central Pivot (BC)
3. Top Central Pivot (TC)

These are derived out of the underlying’s High, Low, and Close calculations –

Pivot = (High + Low + Close)/3

Bottom CPR = (High + Low)/ 2

Top CPR = (Pivot – BC) + Pivot

Once you have the PP, you can calculate the support and resistance levels for the current day using the following formulas:

• First Resistance (R1) = 2 * PP – Low of previous day
• Second Resistance (R2) = PP + High of previous day – Low of previous day
• Third Resistance (R3) = High of previous day + 2 * (PP – Low of previous day)
• First Support (S1) = 2 * PP – High of previous day
• Second Support (S2) = PP – High of previous day + Low of previous day
• Third Support (S3) = Low of previous day – 2 * (High of previous day – PP)

The CPR can be used in various ways, such as identifying potential entry and exit points for trades, determining stop-loss levels, and assessing overall market trends. However, like all technical indicators, it should be used in conjunction with other tools and analysis to make informed trading decisions. price below the BC line.

Value Area Relationship 

The value area is a concept used in market profile analysis, which is a method of evaluating market activity based on price and volume data. The value area is a range of prices where the majority of trading activity occurs, usually defined as the price range where 70% of the trading volume took place during a specified time period.

The value area relationship refers to the relationship between the value area and the previous day’s value area. There are three possible value area relationships:

1. Overlap: If the current day’s value area overlaps with the previous day’s value area, it suggests that the market is in a balanced state and that there is no clear directional bias.

2. Higher Value Area: If the current day’s value area is higher than the previous day’s value area, it suggests that the market is in an uptrend and that buyers are in control.

3. Lower Value Area: If the current day’s value area is lower than the previous day’s value area, it suggests that the market is in a downtrend and that sellers are in control.

The value area relationship can provide traders with valuable information about the market’s current state and potential future direction. However, it should be used in conjunction with other technical and fundamental analysis tools to make informed trading decisions.