The CPR forex indicator(Central Pivot Range) is an advanced Pivot indicator that provides technical support for daily price-level analysis.
Using Pivot points to determine short-term support/resistance levels is a popular strategy among forex and stock day traders. It outlines crucial event areas of the market where the price decides its next movement direction.
Technically, CPR works similarly to the original pivot points indicator. But it brings a new idea of identifying the critical price levels using the chart’s top, bottom, and central pivot points. Moreover, it also demonstrates a series of S/R lines based on daily, weekly, and monthly price actions.
However, CPR doesn’t generate straight buy/sell signals like most pivot indicators. It only outlines the potential areas where you might encounter exciting changes in the supply/demand of an asset and convert them into trading opportunities. Therefore, a basic understanding of candlestick patterns might help you anticipate highly probable trade signals at key price levels.
How the CPR indicator works, and how it use them to determine the buy-sell levels?
The CPR comprises three pivot levels ﹘ central pivot (PV), top central pivot (TC), and bottom central pivot (BC).
The central pivot helps you to assess the bullish/bearish sentiment of the price. For instance, the price holding its position below the central pivot level indicates a bearish momentum. At this point, prepare yourself in advance for a possible upcoming sell opportunity.
Both TC and BC levels help you determine the price direction based on the current market sentiment. For example, if the price turns higher than TC, the asset is under immense buy pressure and will likely move north. So, triggering a buy order in this situation could enable you to get the maximum benefit from the current bullish momentum.
Furthermore, CPR plots a series of support and resistance lines surrounding the central pivot level, which you may use to anticipate profit targets and stop-loss positions.
The CPR indicator represents a simple way to use pivot points best. It is a helpful tool for technical traders, especially beginners who find it complicated to manually determine the daily support/resistance levels. However, more than pivot lines alone might be needed to carry more confirmation for executing an order. Therefore, using additional tools like trendlines and moving averages along with CPR might benefit you from using pivot points in Metatrader 4.