In an interesting session as a part of the highly popular Face2Face series, conducted by Elearnmarkets, Mr Vivek Bajaj, Co-founder of Elearnmarkets, invited Mr Gomathi Shankar, a successful stock market investor with many years of experience, to decode Profitable Options Trading using CPR Indicator.
Mr Gomathi Shankar, (Founder & CEO, Scalpers Trading Academy, Chennai) is a full-time trader and trainer skilled in Price Action Trading with more than 7 Years of experience in Financial Markets.
He graduated with a Mtech from Anna University and Finance Management from the Loyola Institute of Business Administration, Chennai.
He is also a Certified Research Analyst and Technical Analyst, having past work experience with Karvy Stock Broking, Spider Software Pvt Ltd, and Zerodha Stock Broking.
In this blog, our speaker will talk about profitable options trading with the help of the CPR Pivot System. In addition, he will discuss various subtopics that are a part of the CPR Pivot system, such as CPR indicators, formula, characteristics, and types of CPR.
Understanding Central Pivot Range-CPR Indicator
Central Pivot Range (CPR) Indicator is common among retail traders as it is mainly based on price action.
So generally, there will be one pivot line; above the pivot line, there are resistances, and below, there will be support levels, so when we use points, there is only one concept that we all know.
If the price is trading about the pivot point, then we have to look only for long opportunities, and the price that is trading below the pivot point has to look only for the short opportunities.
The CPR consists of three components –
- Pivot = (High + Low + Close)/3
- Bottom CPR = (High + Low)/ 2
- Top CPR = (Pivot – BC) + Pivot
The CPR does just this, i.e., it 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.
If the 3 lines are closer to each other, it is known as Narrow CPR, indicating that the market is trending.
If the 3 lines are not closer to each other, it is known as wider CPR, indicating that the market is sideways.
One should note that:
- Tomorrow’s CPR will be narrow-ranged if today is a narrow range day.
- If today is a trending day, tomorrow’s CPR is a wide-ranged one. The higher the trend, the wider the CPR.
How to use CPR Indicator?
Traders can use the CPR Indicator as developed by Mr Gomathi Shankar in Tradingview as shown below:
One should note that when trading with this indicator, one should use:
- 5 minutes chart for daily CPR Indicator
- 1-hour chart for weekly CPR Indicator
- Daily chart for monthly CPR Indicator
Options Selling
Mr Gomathi Shankar uses a weekly CPR indicator for trading positional options selling. He says that options selling is not risky unless you take hedge your position, and also, we can do part-time.
One should be an options opportunist and not the buyer or seller of an option.
You can also join our course on Certification in Online Options Strategies
Options Selling using CPR Indicator.
Whenever the market is above CPR, the speaker does a bull put spread and Whenever the market is below CPR, the speaker does a bear put spread, the historical data as shown below:
So, the speaker uses the weekly CPR indicator in the hourly chart and waits for 1-hour candle to form on Monday and closes the position on Thursday, the day of expiry.
So, if the candle closes above CPR, he will take the bull put spread strategy. According to him, one should consider the previous week’s low and S1 as together.
He takes 50% of the previous week’s low and weekly CPR. Suppose the 50% range is around 34,700, so he will sell 34,700 puts and buy 300 strike prices away, i.e. 34,400 puts and close the position on Thursday expiry.
Also, the maximum profit will be the stop-loss. One does not check any other indicator like open interest or options Greek. This is a pure price action strategy.
More Webinars Mr Gomathi Shankar
You can watch more Webinarsby Mr Gomathi Shankar from here:
1. “CPR Saves Trades” – A Multi-timeframe Approach
CPR(Central Pivot Range) is a price action trading leading indicator. Using this indicator, price action trading becomes simpler than plain chart analysis. One can be successful in trading the stock markets if he has a strong understanding of price movement in all timeframes. Price along with CPR indicator can give the best probable direction. Participants will be able to analyse the trend with ease and build conviction for scaling up with trends & initiate larger positions.
2. Become a pro-in-Stock Selection
In this webinar, we will extensively focus on the high probable stock selection which has the potential to give a good rally for day trading as well as swing trading.
3. Understanding Price Action Trading in Technical Analysis
In simple terms, Price Action Trading is underrated in technical analysis and often ignored by traders. This webinar aims to prove the importance of price action trading and dow theory with practical chart examples which will release the complicated approach towards trading rather than looking into complex trading systems.
You can watch the entire video here
Bottomline
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Happy Investing!
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