Simplicity in a trading system is important. Simple strategies make money. Why? Two reasons: Quick decision making and Ease of analysis. A trading system with 20 items on the checklist will very rarely have all 20 of them met.

A simple trading system has 4 or 5 items on the checklists at most. Also, the indicators must be simple to interpret. Let us discuss one simple OHLC indicator that is plotted based on previous day’s candle’s High, Close, and Low price. The indicator is called Central Pivot Range (CPR).

Central Pivot Range: Understanding the components

Central Pivot Range has 3 components: Central pivot point, Bottom Central (BC) pivot, and Top Central (TC) pivot. This intraday indicator’s values are calculated based on previous day’s price points.

• Central pivot point = (High + Low + Close)/3

• Bottom Central pivot = (High + Low)/2

• Top Central pivot= (CPR - BC) + Central pivot point

The Central pivot point is a potential support or resistance for today’s session. If the Central pivot is enough to tell us about support or resistance point, then what is the use of the BC and TC line?

These two lines plot above and below the Central pivot price, depending on the previous day’s candle. The width between these three lines has the potential to tell us about the volatility of current day.

How to interpret CPR and integrate into system

CPR can be used to understand the momentum for the day.

Momentum of the day

When the CPR lines are narrow, i.e, the width between the lines is less, we can expect the day to have high momentum.

When the CPR lines are wide, i.e, the width between the lines is high, we can expect the day to have low momentum.

Observe the chart below of Nifty 50. The timeframe used is 15-min. Observe the chart on 10th Feb 2025. The CPR is narrow. The price on that day was trending downwards. On the same chart, observe 12th Feb 2025. The CPR was relatively wide and the trend on the day was sideways.

This is applicable on stock charts as well. Observe the chart below of RELIANCE. Observe the chart on 11th Feb 2025. The CPR was narrow, and the price was trending. On the same chart, observe 12th Feb 2025. The CPR was wide, and the price was sideways.

The chart below is of BSE. Observe on 10th Feb 2025, the CPR was wide and the trend was sideways. The next day, 11th Feb 2025, the CPR was narrow, and the price was trending. on 12th Feb, the CPR was very wide. Although the momentum was a bit high, the trend was sideways. The same was the case on 13th Feb. The next day, the indicator was narrow, and the price was trending.

How about a relatively volatile index such as Nifty Bank? Can this use of CPR work on Nifty Bank?

Observe the chart below of Nifty Bank. On 18th Feb 2025, the CPR indicator was wide. The price on that day was majorly sideways. For a directional trader, this would be a warning sign. The next day, the CPR was narrow. The price was trending right from the morning and closed higher than the day’s Open price. On 20th Feb, the indicator was wide again. The price opened and closed around the same levels that day. On 21st Feb, the indicator was narrow. The price was trending that day.

CPR, like other indicators, is not right all the time. For example, look at the Nifty Bank chart again. on 14th Feb, the CPR was wide. Based on what is discussed till now, it should have been a sideways trend with low momentum. But the price was trending that day. This is okay. What a trader can learn from this is that not all indicators will work all the time. This is why only relying on one piece of information is not enough. Also, not every system or indicator needs to be perfect and accurate 100% of the time. What is important is that it is correct at least 50% or more times.

We would need other pieces of information as well. We could add EMA line, look at RSI as well. In the coming newsletters, we will discuss other uses of CPR as well that will help us interpret this tool more efficiently. We could also use the 15-min rule in the analysis to give a clear picture of the trend. This rule has been my observation for many years now and I have taught this in the ‘How To Trade Candlestick’ course. This course is part of the TNT One, which is a subscription that gives access to all courses and webinars on my website. If you are intrigued by this indicator, do check out TNT One using the link below.