Murrey Math Trading Strategy 3


In my previous post, I mentioned a strategy that could effectively help you to capture the current trend of any financial instrument. However, if you apply that strategy (at least for a considerable amount of time), you will begin to notice that the markets always act choppy when the price is in between 7/8 and +1/8 or 1/8 and -1/8. Whatever meager profit you had managed to accumulate following Strategy 2, will end up getting eroded from your trading account due to this choppy price action nature of the market.

This could in fact explain why I have decided to post Strategy 3 this month. This method simply helps you to avoid at least a small portion of the choppy price action exhibited by the financial instruments.

Here is the strategy in pictorial form

Rather than trying to guess the top and bottom of the market, this strategy effectively helps you to keep on trading with the trend. 4/8 is an important value because it divides 0/8 and 8/8 into equal halves. So, if the market is trading above 4/8, it will definitely have a tendency to keep on moving higher. Likewise, if the market is trading below 4/8, it’s tendency will be to keep on going lower.

Obviously there are going to be days when the market stays in between 3/8 and 5/8. On such days, your trading account will take a major hit because of the choppy price action. The best thing to do in such situations is to call it a day and stop trading. This is one of the drawbacks of the strategy. Even Murrey himself proclaims that the market will often try to stay in between 3/8 and 5/8 (as often as 43% of the time). So he suggests doing the exact opposite of what I have posted as strategy 3 (i.e. to sell at 5/8 and buy at 3/8).

Another point to note is that this strategy is not something that I found on my own. There were a couple of text documents written long back – I am not able to locate them online at the time of this post – this strategy was explicitly mentioned in one of those documents. If I find them, I will post it.

About Praveen Pious Francis
A part-time blogger who has a wide range of interests including investing in the stock markets across the globe and broadband technologies in India. If you feel that this post has helped improve your daily trading activities, please consider donating to my PayPal praveenpious@live.com. Donations encourage me to keep on researching newer day trading strategies.

One Response to Murrey Math Trading Strategy 3

  1. Pingback: Murrey Math Excel Calculator | Candid Writer

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