Murrey Trading Strategy Lines and Price Action

The Murrey math trading lines strategy is the most attractive Forex trading strategy because it’s suitable for all time frames and it can be used to trade different markets likes stocks, commodities and Forex currencies.

Murrey Math is a complex set of support and resistance levels that act more or less the same as pivot points but also they provide some insights whether the current trend should continue or it should reverse. The Murrey math concept has been developed by T. Henning Murrey in 1995 and has been described in great details in his book “The Murrey Math Trading System For All Traded Markets.”

First of all, we have to emphasize one of the main principles of Murrey math is that the markets behave similarly. So, the main assumption is that the smart money behaves the same in all markets and hence why different markets have similar characteristics.

Defining the murrey math lines

The Murrey math is based on observations that were made by WD Gann in the first half of the 20th century. The Murrey math was inspired by the Gann theory and he created a system of geometry that can be used to describe market price movements in time. That geometry facilitates the use of Gann trading techniques.

The Murrey math geometry is very elegant in its simplicity which makes the Murrey math trading lines strategy a perfect automatical fractal trading system. The core element of the Murrey trading is that the price movement of any market will retrace in multiples of 1/8, 2/8 all the way up to 8/8. Since prices move in 1/8’s. Murrey math divides prices into 1/8 intervals.

murrey lines

Murrey Math Lines
The Murrey Math lines consist of 8 “pivot points” with each line having a different meaning to the price action. Essentially what the Murrey math trading lines strategy does is to divide the price into 8 important levels with the 8/8, 4/8 and the 0/8 levels being the most significant pivots.

Now…

Before we move forward, we must define the indicators you need to trade The Murrey math trading lines strategy and how to use Murrey lines.

The only indicator you need is the:

Murrey Lines indicator which can be found on most popular Forex trading platforms (MT4 and TradingView) under the indicators library.

The Murrey lines have nine main components or variables plus 6 extra pivots that can reveal extreme overbought or oversold conditions and each of them will tell you a different story about the price action as follow:
· [+3/8]P – Imminent Bearish reversal
· [+2/8]P – Extreme Overshoot conditions, can reverse anytime
· [+1/8]P – Overshoot conditions
· [8/8]P – Ultimate resistance, extremely overbought conditions
· [7/8]P – Weak level, place to stop and reverse
· [6/8]P – Strong pivot reverse
· [5/8]P – Top of trading range
· [4/8]P – Major support/resistance pivotal point
· [3/8]P – Bottom of trading range
· [2/8]P – Strong, Pivot, reverse
· [1/8]P – Weak, place to stop and reverse
· [0/8]P – Hardest line to fall below, oversold conditions
· [-1/8]P – Oversold conditions
· [-2/8]P – Extreme oversold conditions, can reverse anytime
· [-3/8]P – Imminent bullish reversal

Now that we have a solid idea of what each of the Murrey lines represents it’s time to outline the Murrey trading rules. Without further ado, this is a step by step guide to Murrey trading:

Murrey Math Trading Lines Strategy
(Rules for A Buy Trade)


Step #1: Check the 15-Minute Time Frame and Make Sure We’re Trading Below the 4/8 Murrey Lines (the Middle Blue Line)

The first buying condition of the Murrey trading strategy that needs to be verified is that the price needs to trade below the 4/8 Murrey Lines. While this strategy can be applied to all time frames for the purpose of this Murrey trading strategy we’re going to use the 15-minute chart.

The Murrey lines are dynamic pivot points that changes with flowing price action which is one of the reasons why the price action usually will be contained between 0/8 and 8/8 Murrey lines with the 4/8 pivot being the most important level.

It’s not enough for the price to trade below the 4/8 Murrey Lines which brings us to the next condition of the Murrey Math Trading Lines Strategy:

Step #2: Once the Price is Trading Below the 4/8 Murrey Lines it Also Needs to Trade Below the 2/8 Murrey Lines.

The main reason why we also need for the price to deep below the 2/8 Murrey Lines is because we need the price structure to create space between the Murrey lines. This will ensure that once we break higher again, it will increase the probability of successfully breaking through the 4/8 Murrey lines.

A picture speaks a thousand words, so here is what you should be looking at:

 

Now, all we have to establish is where to enter our long trade, which brings us to the next step of our Murrey Math Trading Lines Strategy:

Step #3: Enter a Long Trade Once we Reverse and Break above the 4/8 Murrey Lines.

The 4/8 Murrey line is the line in the sand for the buyers and sellers and has the ability to correctly signal a shift in the market sentiment once it’s broken. In this regard, we want to enter with a buy market order as soon as we broke above the 4/8 Murrey lines.

Alternatively, if you want to be more conservative you can always wait for the breakout candle closing price to make sure it’s a genuine breakout.

Now it’s time to learn where it’s the ideal place to hide our stop loss, which brings us to the next step:

Step #4: Place Your Protective Stop Loss Below the 0/8 Murrey Lines

The 0/8 Murrey lines is the hardest pivot for the price to fall below which is the reason why it’s the ideal place to hide our protective stop loss order. There is also no need to add any extra buffer as we don’t want to lose more than it is necessary.

Now, let’s move forward and establish where to take our profits:

Step #5: Take Partial Profits (Preferably 50% off Your Entire Order) at 6/8 Murrey Lines and Also Move the SL to BE

The 6/8 Murrey line is the first strong pivot from where the price can reverse so we want to take our profits right there. At the same time, the next action that you need to take is to protect your remaining position by moving your SL at BE.

Now let’s move forward and see where we should liquidate the remaining part of our trade.

Step #6: Take Final Profit at 8/8 Murrey Lines

Finally, we have to close our trade once we reach the 8/8 Murrey lines which is the ultimate resistance level, signaling extremely overbought conditions in the market.

It’s important to mention that if the market is breaking the 4/8 pivotal point multiple times on both sides, it’s best to wait until you can clearly apply Murrey trading setup by applying the Step #1 through Step #3.

Note** The above was an example of a buy trade using the Murrey Math Trading Lines Strategy. Use the same rules – but in reverse – for a sell trade. In the figure below you can see an actual SELL trade example using the Murrey Math Trading Lines Strategy.

Conclusion

The Murrey Math Trading Lines Strategy is the ultimate support and resistance system because unlike the simple support and resistance levels the Murrey lines are mathematically driven and possess a greater influence on how the price reacts to each of these levels.

The same Murrey trading principles outlined throughout this article can be applied to any instrument because according to Murrey “all markets behave in the same manner akin to a herd,” and can be used on any time frame so that it can fit your trading style.

Thank you for reading The Murrey Trading Strategy

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  • Nice to be visiting your forex blog again, it has been months for me. Well this forex article that i’ve been waited for so long. I need this forex article to complete my assignment in the college, and it has same topic with your article. Thanks, great share.

  • Elie Haykal

    Very informative !

  • Dudley

    For anyone who is still sceptical about using MM lines. Here is a chart of the EURCHF 30 min. On Friday, the NFP news pushed price up to just below a supply level I had marked on the chart and turned exactly at a MM Line. Price has just now stalled exactly at a MM line. As Mr Karthik said, if you understand price action then MM lines are very good to trade from. See the second ellipse (the 6/8 red MM line @ 1.5747), on the chart, price was moving down, then retraced back to this MM line and reversed back down for nearly 250 pips. Using MM lines with price action or supply and demand areas is the way to go.
    http://twitpic.com/2lz6zh

  • Dudley

    You are very sceptical. I am unable to attach a chart, but If I could, I would show you todays Cable chart with 2 examples of 30 pips scalps at a MM line in the direction of the day’s trend.

  • Hi Raj,
    thanks for the comment. there is no short cut method for becoming a trader…u need to spend long hours and several hours at it to make it as ur profession, just like how many years you spend in college trying to become an expert in your chosen field….just get some basic forex books to start off and then you need toslowly build on it….it is a long hard road, just like any other business/profession…

  • raj

    HI I M NEW TO TRADING AND ONLY KNOW THE JUST BASICS COULD YOU HELP ME TO LEARN HOW DO TRADE PROFFESIONALLY OR WHAT STEPS I HAVE TO TAKE TO BE GOOD TRADER PLSE HELP ME OUT. HOW I START WHETHER I READ BOOKSOR WHAT EFFORT SHOULD I TAKE PLEASE SUGGEST ME,,,,

  • Guest

    If you draw a bunch of lines on your chart after every specific small interval, it will always find support or resistance. Can it identify with a good probability where a pullback is going to occur? Otherwise, it’s a pure crap.

  • hi dudley….nice to know that u use it as well…..thats the advantage of using price action and MM lines…it works in all TFs provided u know what u r dealing with…

  • Dudley

    Hi Karthik, I also use MM lines. They are very good for scalping a bounce in the direction of the intrady direction. I usually wait for price to retrace to a MM line and scalp to the next MM level on the 5min TF.

  • yes indeed…..each TF gives different levels…u need to use it for the TF that u usually trade in…

  • Karthik

    Hey Pat….nice to see u here as well…

  • Spider

    The problem with using the Murrey lines is that there are several versions of the indicator and some traders have found that different versions work with different time frames.
    I have used the Murrey level with a daily chart quite successfully.
    Spider

  • Patricio A

    Hi Karthik good to see you here!!!