Using the Murrey Math Lines
Murrey math lines and forecasts come in pretty handy when striving for the 100% fulfilled Technical Analysis. The great contribution of T. H. Murrey was the development of a system of geometry that can be used to follow market price movements in time.
The indicator includes 9 lines that move parallel to one another. The first line from the bottom (0/8 - oversold) and the last one (8/8 - overbought) are the hardest lines to cross, and when it happens, the chances of the price reversal are pretty high. The normal trading range is considered to be between the lines 3/8 and 5/8. These lines are actually crucial in determining the state of the trading market. If the price stays near the line 5/8 for more than 8-9 days, it is advisable to sell in this zone. When the price is running down below the line 3/8, it will most likely continue falling to the next resistance level.
When the price appears between two lines, the upper one is regarded as resistance and the lower one - as support.
What Should the Trader Be Cautious Of?
Murrey Math lines are basically a set of support and resistance lines and like any such line are unpredictive. This means that while trading with the help of these lines, there's always a risk of price not moving in the direction suggested by Murrey. Therefore, the trading strategy that is based on Murrey math lines better have a good risk management to avoid losing capital.