PCR Trading Strategies That Actually Work

The Put Call Ratio (PCR) is one of the most powerful tools for understanding market sentiment. Whether you’re an intraday trader or a long-term investor, knowing how to interpret PCR can give you an edge in the markets. In this guide, we’ll cover everything you need to know about PCR and how to use it effectively.

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What Is Put Call Ratio and Why Is It Important?

The Put Call Ratio (PCR) is a technical indicator that compares the trading volume of put options to call options in a specific time frame.

Formula:

Put Call Ratio=Volume of Put OptionsVolume of Call Options\text{Put Call Ratio} = \frac{\text{Volume of Put Options}}{\text{Volume of Call Options}}Put Call Ratio=Volume of Call OptionsVolume of Put Options​

• A high PCR (>1) means more traders are buying put options (bearish sentiment).

• A low PCR (<1) suggests more traders are buying call options (bullish sentiment).

Why it matters: The PCR helps traders gauge market psychology—whether fear or greed dominates.

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How to Interpret Put Call Ratio for Better Trading Decisions

Understanding the levels of PCR is crucial:

Pro Tip: PCR is a contrarian indicator—when fear is high (PCR >1.2), markets often rebound as sellers are exhausted.

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Put Call Ratio in Indian Markets: Nifty & Bank Nifty Focus

In India, the PCR is widely used for indices like Nifty 50 and Bank Nifty.

• Nifty PCR >1.2 = Overly bearish sentiment, possible bounce.

• Nifty PCR <0.7 = Overly bullish sentiment, risk of correction.

Popular tools to check PCR in real-time:

• NSE India website

• Fyers App

• Angel One Terminal

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PCR Trading Strategies That Actually Work

a) Contrarian Strategy

• When PCR spikes above 1.2 → Start looking for bullish reversal setups.

• Combine with RSI <30 for confirmation.

b) Trend Confirmation Strategy

• PCR stays between 0.7–1.0 → Confirms existing trend strength.

• Trade in the direction of the trend.

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Limitations of Put Call Ratio You Should Know

While PCR is powerful, it’s not perfect:
PCR doesn’t consider option premiums—only volumes.
Low liquidity stocks can show misleading PCR readings.
Best used with other indicators like VIX, RSI, or moving averages for confirmation.

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Final Thoughts: Should You Use PCR?

The Put Call Ratio is an essential sentiment tool for every trader in 2025. Used wisely, it helps you avoid herd mentality and make smarter decisions. But remember—it works best when combined with other indicators and sound risk management.