If you don’t have much time to trade and want to avoid the potential stress that forex day trading can cause, you might want to consider a monthly forex strategy. This requires much less time as you only really need to check the currency pair charts a few times each month for entry and exit opportunities. Granted, there will be much less opportunities, but the upside to this is that the monthly chart signals can be stronger as they filter out a lot of the noise from the lower chart timeframes. If you get into a trend on the monthly charts, you can stay in it for a very long time.
Monthly forex trading strategy
I am going to focus on a forex trend trading strategy for the monthly charts. We are looking to identify if a currency pair is trending up or down, and time our entry inline with the trend. We will look to stay in the position for as long as possible in order to maximise the move.
I would try to cut losing trades short and let winning trades run. When trading forex on the monthly charts, I would look to move the stop loss to breakeven point at the first opportunity. I might then trail the remainder of the position with a trailing stop to try and get the most out of each trade.
One of the things that I like about the forex monthly charts is that technical indicators can be more reliable and therefore I do not need to overdo the analysis. I find that when trading the lower chart timeframes such as the 1-hour or 4-hour charts, there can be more false signals as there is a lot of market noise. When we have more data for analysing price action, the signals can be stronger.
Monthly forex strategy buy signal
- MACD crossover below the zero line
- Price moving from support level
- Bullish price action
In the USD/JPY monthly chart below, you can see that price has bounced away from a strong support level. The MACD crossover has happened below the zero line which suggests we may be seeing the start of an uptrend. This gives us a chance to get in at a very early opportunity. There are some bullish candlestick patterns including three white soldiers and engulfing bars. This would have been an early time to enter the position, some traders may have waited for when the price broke through the following resistance level and used a MACD breakout strategy. Stop loss could have been placed just below the recent swing low which is around 500 pips. As I said, monthly forex strategies do require wider stop losses. However, this uptrend continued for over 4,500 pips which gave a good risk to reward ratio overall.
Monthly forex strategy sell signal
- MACD crossover above the zero line
- Price moving from resistance level
- Bearish price action
You can see from the GBP/USD monthly chart below that the price was bouncing from a recent resistance level. The MACD crossover happened above the zero line which means we could have been expecting the start of downwards momentum and had a chance to get in right at the start. There is strong long-term bearish price action with candlestick patterns including hammers and inside bars. We could have placed the stop loss around the recent swing high which is 500 pips. Yes, this is a wide stop loss but when you consider the GBP/USD went down over 3,000 pips in this move, there was ample opportunity to make a good amount of pips on this trade.
Advantages of trading forex monthly charts
- Catch some big market moves
- Requires less time chart watching
- Filters out a lot of the market noise
- Indicators can be more reliable
- Less stressful than scalping
- Can use any currency pair
- Not impacted as much by spreads
Disadvantages of trading forex monthly charts
- Infrequent trading signals
- Need a wider stop loss
- Takes time to compound account
- Long time demo trading
Conclusion: should I trade using a monthly forex strategy?
Yes, if you are looking to trade forex but find that you are short on time or make mistakes when day trading, then I think monthly forex strategies can be a great solution. They allow you to spend less time analysing charts and trading signals can be easier to spot.
If you get into a good position, you could be in it for months or even years. Not to mention, you will save on costs that you need to pay your broker such as the spread and commission.
However, trading the monthly forex charts does mean that there will be much less signals compared to trading on the forex daily or weekly charts. It can also take a lot longer to build up an account balance and if you are practising on a demo account, it will probably take years before you can improve your trading skills.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.