When I first started working with Murrey Math, I treated all the lines as simple pivots -
support/resistance areas which could be used to confirm buy/sell signals. I realised that some
levels are often repeated across different timeframes, which I thought simply made them
stronger pivots. Then over time I got to understand a little more about how the Murrey works
and here are a few tips from what I have learned so far. Firstly a bit about the individual lines
themselves:
Firstly there's the obvious - when the market is over-extended in either direction (i.e at the
overshoot or extreme overshoot lines) there's a good chance of a move back the other way,
especially if there is confirmation from other indicators.
Then there's the one we've mentioned - the two Murrey strategies:
Buy at 1/8 close at 4/8 or Buy at 0/8 close at 2/8
Sell at 7/8 close at 4/8 or Sell at 8/8 close at 6/8
I haven't tested these too much but from what I can tell a little discretion is involved - the
strike rate is not high enough to be purely mechanical about it.
The "Trading Range" lines might seem a bit confusing at first, given that the market spends
most of its time outside the trading range, but there's more to it than that - these lines are
actually very important in determining the state or sentiment of the market. Basically, when
the market is between the lines, it is in an undecided state (i.e a trading range). If it is above
the 5/8 line then the market can be considered bullish, likewise below 3/8 we are in a bearish
market. Hence 5/8 is a great support level for re-entering a long trend and 3/8 for short.
A break of these lines can be very important. For example- If the market has been above 5/8
for a period of time but breaks below, that is a sign of bullishness fading. A drop to 4/8
almost always follows, and at that point 5/8 becomes significant resistance, because a break
back above it would represent a re-establishing of the bullish scenario which had just
previously failed.
If the market does indeed re-test 5/8 and fail, that confirms that the bullish sentiment has
pretty much gone and an attempt at a move to 3/8 can be expected. If the market then
breaks below 3/8, it has definitively turned bearish - and 3/8 then becomes strong resistance
as a break back above would represent another change in sentiment, this time back to
indecision.
Note that sometimes the re-test doesn’t occur and the market will break one trading range
line and head straight for the other!
support/resistance areas which could be used to confirm buy/sell signals. I realised that some
levels are often repeated across different timeframes, which I thought simply made them
stronger pivots. Then over time I got to understand a little more about how the Murrey works
and here are a few tips from what I have learned so far. Firstly a bit about the individual lines
themselves:
Firstly there's the obvious - when the market is over-extended in either direction (i.e at the
overshoot or extreme overshoot lines) there's a good chance of a move back the other way,
especially if there is confirmation from other indicators.
Then there's the one we've mentioned - the two Murrey strategies:
Buy at 1/8 close at 4/8 or Buy at 0/8 close at 2/8
Sell at 7/8 close at 4/8 or Sell at 8/8 close at 6/8
I haven't tested these too much but from what I can tell a little discretion is involved - the
strike rate is not high enough to be purely mechanical about it.
The "Trading Range" lines might seem a bit confusing at first, given that the market spends
most of its time outside the trading range, but there's more to it than that - these lines are
actually very important in determining the state or sentiment of the market. Basically, when
the market is between the lines, it is in an undecided state (i.e a trading range). If it is above
the 5/8 line then the market can be considered bullish, likewise below 3/8 we are in a bearish
market. Hence 5/8 is a great support level for re-entering a long trend and 3/8 for short.
A break of these lines can be very important. For example- If the market has been above 5/8
for a period of time but breaks below, that is a sign of bullishness fading. A drop to 4/8
almost always follows, and at that point 5/8 becomes significant resistance, because a break
back above it would represent a re-establishing of the bullish scenario which had just
previously failed.
If the market does indeed re-test 5/8 and fail, that confirms that the bullish sentiment has
pretty much gone and an attempt at a move to 3/8 can be expected. If the market then
breaks below 3/8, it has definitively turned bearish - and 3/8 then becomes strong resistance
as a break back above would represent another change in sentiment, this time back to
indecision.
Note that sometimes the re-test doesn’t occur and the market will break one trading range
line and head straight for the other!
