The Monthly Chart Ichimoku Strategy is a long-term trading approach that uses the Ichimoku Cloud indicator on the monthly timeframe to identify major trends, key support and resistance levels, and high-probability trading opportunities. Because the monthly chart filters out short-term noise, this strategy is ideal for investors and position traders aiming to catch large, sustained moves.

Monthly Chart Ichimoku Strategy techniques provide clear visual cues about the strength, direction, and potential reversals of long-term market trends.

What is the Monthly Chart Ichimoku Strategy?

The Monthly Chart Ichimoku Strategy uses the full set of Ichimoku components:

• Kumo (Cloud): Formed by Senkou Span A and B, defines support/resistance and trend bias.
• Tenkan-Sen (Conversion Line): Short-term trend indicator.
• Kijun-Sen (Base Line): Medium-term trend indicator.
• Chikou Span (Lagging Line): Confirms trend strength by showing current price action against past prices.

Trading signals are based on the interaction of price with the cloud, the Tenkan-Kijun crossovers, the position of the Chikou Span, and the slope and twist of the cloud.

The monthly timeframe smooths out volatility, making signals more reliable for capturing multi-year trends.

How the Monthly Chart Ichimoku Strategy Works

Step 1: Analyse the Cloud (Kumo)

• Price Above the Cloud: Long-term bullish trend.
• Price Below the Cloud: Long-term bearish trend.
• Price Inside the Cloud: Consolidation, avoid trading.

Step 2: Watch for Tenkan-Sen and Kijun-Sen Crosses

• Bullish Cross (Tenkan crosses above Kijun): Buy signal if above the cloud.
• Bearish Cross (Tenkan crosses below Kijun): Sell signal if below the cloud.

Step 3: Confirm with Chikou Span

• Above Price and Cloud: Confirms bullish momentum.
• Below Price and Cloud: Confirms bearish momentum.
• Inside Price/Cloud: Indicates uncertainty.

Step 4: Assess Future Kumo Twist

• A bullish twist (Senkou Span A crosses above Senkou Span B) indicates strengthening bullish momentum.
• A bearish twist indicates potential trend weakness.

Step 5: Enter the Trade
Only trade when multiple signals align (cloud, crossover, and Chikou confirmation).

Step 6: Manage the Trade
Use the Kijun-Sen or the edge of the Kumo as a dynamic stop-loss.

Advantages of the Monthly Chart Ichimoku Strategy

1. Filters Noise
Monthly charts remove short-term volatility, giving clearer trend signals.

2. High Probability Signals
Ichimoku combines multiple indicators into one system, increasing the reliability of signals.

3. Clear Visual Guidance
The cloud provides intuitive support and resistance zones.

4. Long-Term Trends
Ideal for catching and holding major market moves.

5. Dynamic Risk Management
The Kijun-Sen and Kumo boundaries act as natural stop-loss levels.

Challenges of the Monthly Chart Ichimoku Strategy

Late Signals
Because of the monthly timeframe, entries are slower but safer.

Wide Stops
Monthly chart moves are large, requiring wide stop-losses and proper position sizing.

Fewer Trading Opportunities
Signals occur less frequently, demanding patience.

Whipsaws Inside the Cloud
If price is inside the cloud, trading signals are unreliable.

Simple Example of a Monthly Chart Ichimoku Trade

1. Market: EUR/USD
2. Current Condition:
   • Price above the monthly Kumo.
   • Bullish Tenkan-Kijun cross above the cloud.
   • Chikou Span above price and cloud.
   • Future Kumo bullish (Span A above Span B).
3. Trade Plan:
   • Enter a long position at the close of the bullish crossover candle.
   • Set a stop-loss below the Kijun-Sen or the bottom of the Kumo.
   • Hold the position as long as price remains above the Kijun-Sen.
4. Risk Management:
   • Use small position sizes due to the large distances involved.
   • Consider scaling into the trade if price retests the Kijun-Sen.

This simple setup can help catch large multi-year bullish trends with minimal intervention.

Best Practices for the Monthly Chart Ichimoku Strategy

• Trade only clear signals. Ignore setups where price is inside the cloud.
• Use multiple confirmations. Look for cloud, crossover, and Chikou Span alignment.
• Accept wider stops. Position sizing must be adjusted to account for larger swings.
• Stay patient. Monthly setups are rare but powerful.
• Review regularly. Check the chart once a month to adjust stop-losses and assess trend strength.

Ideal Markets for the Monthly Chart Ichimoku Strategy

• Major forex pairs (EUR/USD, GBP/USD, USD/JPY)
• Major stock indices (S&P 500, NASDAQ 100, FTSE 100)
• Commodities (Gold, Oil)
• Cryptocurrencies (Bitcoin, Ethereum)

Assets with strong long-term trends are particularly suited to this strategy.

Conclusion

The Monthly Chart Ichimoku Strategy provides a powerful, systematic approach to capturing long-term trends with high probability setups. By focusing on clear signals from the cloud, crosses, and lagging line, traders can ride major moves with confidence while filtering out short-term noise. However, success requires patience, discipline, and a strong understanding of Ichimoku principles.

If you are ready to master Ichimoku Cloud strategies and learn how to apply them across different timeframes and asset classes, explore our Trading Courses and start building robust, trend-following trading skills.