HM2 - Murrey Math Levels

# Murrey Math Indicator - Comprehensive Description

## **What is Murrey Math?**

Murrey Math is a trading system developed by T.H. Murrey that divides price action into 8 equal segments (octaves) based on Gann and geometry principles. It automatically identifies key support and resistance levels where price is likely to react, making it a powerful tool for determining entry/exit points and price targets.

## **How It Works**

The indicator:
1. **Analyzes price history** over a lookback period (default 64-200 bars)
2. **Finds the highest high and lowest low** in that period
3. **Calculates a "fractal"** - a geometric scaling factor based on price magnitude
4. **Creates 8 equal divisions** between key levels, plus 4 overshoot levels (total 13 levels)
5. **Labels each level** from -2/8 to +2/8 with their trading significance

## **The 13 Murrey Math Levels**

### **Core Levels (0/8 to 8/8):**

- **[0/8] - Ultimate Support** (Blue)
- Extreme oversold condition
- Strong buying opportunity
- Price rarely breaks below this

- **[1/8] - Weak, Stall & Reverse** (Orange)
- Weak support level
- Price often stalls and reverses here

- **[2/8] - Pivot/Reverse Level** (Red)
- Major support that can become resistance
- Important reversal zone

- **[3/8] - Bottom of Trading Range - BUY Zone** (Green)
- Bottom boundary of normal trading
- **Premium BUY zone** - 40% of trading happens between 3/8 and 5/8

- **[4/8] - Major Support/Resistance** (Blue)
- **THE MOST IMPORTANT LEVEL**
- The midpoint - best entry/exit level
- Strong pivot point that price respects

- **[5/8] - Top of Trading Range - SELL Zone** (Green)
- Top boundary of normal trading
- **Premium SELL zone**

- **[6/8] - Pivot/Reverse Level** (Red)
- Major resistance that can become support
- Important reversal zone

- **[7/8] - Weak, Stall & Reverse** (Orange)
- Weak resistance level
- Price often stalls and reverses here

- **[8/8] - Ultimate Resistance** (Blue)
- Extreme overbought condition
- Strong selling opportunity
- Price rarely breaks above this

### **Overshoot Levels:**

- **[-2/8] & [-1/8]** (Gray) - Extreme downside overshoot zones
- **[+1/8] & [+2/8]** (Gray) - Extreme upside overshoot zones
- These indicate extreme moves beyond normal trading ranges

## **Trading Zones (from your diagram)**

1. **Consolidation Trading Area** (0/8 to 3/8)
- Price is in a bearish zone
- Look for BUY opportunities near support levels

2. **Normal Trading Area** (3/8 to 5/8)
- **40% of trading occurs here**
- Price oscillates between these boundaries
- Range-bound trading strategies work best

3. **Premium Trading Area** (5/8 to 8/8)
- Price is in a bullish zone
- Look for SELL opportunities near resistance levels

## **Trading Strategies**

### **Buy Signals:**
- Price bounces off 0/8 (ultimate support)
- Price pulls back to 3/8 in an uptrend
- Price breaks above 4/8 after consolidation

### **Sell Signals:**
- Price rejects at 8/8 (ultimate resistance)
- Price rallies to 5/8 in a downtrend
- Price breaks below 4/8 after consolidation

### **Range Trading:**
- Buy near 3/8, sell near 5/8 when price is ranging
- Use 4/8 as the pivot to determine trend direction

## **Key Advantages**

✅ **Objective levels** - No subjective placement
✅ **Self-adjusting** - Automatically recalculates based on recent price action
✅ **Clear trading zones** - Easy to identify support/resistance
✅ **Works on all timeframes** - From 1-minute to monthly charts
✅ **Combines with other indicators** - Works well with RSI, MACD, etc.

## **Important Notes**

- The indicator is **dynamic** - levels update as new highs/lows form
- **4/8 is the most critical level** - price above = bullish, below = bearish
- When price reaches overshoot levels (±1/8, ±2/8), expect strong reversals
- Works best in trending markets; can give false signals in choppy conditions

This geometric approach to support/resistance has been used by traders for decades and remains popular due to its objective, mathematical nature!