The Monthly-Weekly Trend Strategy is a high-probability trading approach that combines the analysis of monthly and weekly timeframes to identify the overall market trend and make informed trade decisions. This strategy focuses on using the monthly chart to determine the long-term market trend and the weekly chart to fine-tune entries and exits within that trend. It is ideal for position traders and swing traders looking for larger moves and more reliable trends.

By combining the long-term perspective of the monthly chart with the medium-term analysis of the weekly chart, this strategy helps traders align their trades with the broader market trend, improving the accuracy of entries and increasing the potential for sustained profits.

Why the Monthly-Weekly Trend Strategy Works

• Trend Alignment: By using both the monthly and weekly timeframes, traders can ensure that their trades are aligned with the dominant market trend, which increases the likelihood of success.
• High-Probability Entries: The monthly chart helps identify the overall market direction, while the weekly chart provides more precise entry points. This combination filters out market noise and ensures that trades are entered at optimal levels.
• Reduced Risk: By confirming the trend on a monthly timeframe, traders avoid entering counter-trend positions and reduce the risk of being caught in false breakouts or reversals.
• Long-Term Profits: This strategy works well for capturing long-term price moves. By staying in trades for an extended period, traders can benefit from strong trends and ride the market momentum to achieve larger profits.

How the Monthly-Weekly Trend Strategy Works

The Monthly-Weekly Trend Strategy involves using the monthly chart for long-term trend identification and the weekly chart for precise entry and exit points. Here’s how it works:

1. Identify the Trend on the Monthly Chart

Start by analysing the monthly chart to get an understanding of the long-term market trend. The monthly timeframe gives a broader perspective of the market, helping you determine whether the market is in a bullish, bearish, or neutral phase.

• Bullish Trend: Look for higher highs and higher lows. The price should be above the monthly moving average (e.g., the 50-month MA), indicating that the market is in an uptrend.
• Bearish Trend: Look for lower highs and lower lows. The price should be below the monthly moving average, suggesting that the market is in a downtrend.
• Neutral Market: If the market is moving sideways and price is fluctuating within a range, it may indicate a neutral market, which could lead to consolidation or indecision.

2. Confirm the Trend on the Weekly Chart

Once you’ve determined the overall trend direction on the monthly chart, switch to the weekly chart for further confirmation and to pinpoint entry signals.

• For Bullish Trades: Look for bullish setups on the weekly chart, such as a bullish engulfing pattern, hammer, or a breakout above resistance. The RSI or MACD should also support the bullish momentum by showing values above 50 (RSI) or a bullish MACD crossover.
• For Bearish Trades: Look for bearish setups on the weekly chart, such as a bearish engulfing pattern, shooting star, or a breakdown below support. Ensure that the RSI or MACD is confirming the bearish momentum by showing values below 50 (RSI) or a bearish MACD crossover.

3. Look for Confluence Between Monthly and Weekly Trends

For the highest probability trades, ensure that the trend on the weekly chart aligns with the trend on the monthly chart. This confluence between the two timeframes helps confirm that the price is likely to continue in the direction of the broader market trend.

• For Long Positions: If the monthly chart is in an uptrend and the weekly chart shows bullish price action (e.g., a bullish engulfing pattern or a breakout above resistance), this signals a high-probability long entry.
• For Short Positions: If the monthly chart is in a downtrend and the weekly chart shows bearish price action (e.g., a bearish engulfing pattern or a breakdown below support), this signals a high-probability short entry.

4. Entry and Exit Signals on the Weekly Chart

After confirming the trend direction on the monthly chart, use the weekly chart to time your entries and exits. Look for clear price action signals and patterns to confirm your position:

• For Long Entries:
  • Look for a bullish reversal pattern (e.g., bullish engulfing or hammer) or a breakout above resistance.
  • The RSI on the weekly chart should be above 50, indicating that the bullish momentum is strong.
  • Enter the trade when the price confirms the signal.
• For Short Entries:
  • Look for a bearish reversal pattern (e.g., bearish engulfing or shooting star) or a breakdown below support.
  • The RSI on the weekly chart should be below 50, indicating that the bearish momentum is strong.
  • Enter the trade when the price confirms the signal.

5. Risk Management and Trade Management

Once you’ve entered the trade, set your stop-loss and take-profit levels based on key levels on the weekly chart. This can be swing highs and swing lows, or support and resistance zones.

• Stop-Loss:
  • For long trades, place the stop-loss below the most recent swing low or below a key support level on the weekly chart.
  • For short trades, place the stop-loss above the most recent swing high or above a key resistance level on the weekly chart.
• Take-Profit:
  • For long trades, set the take-profit at the next resistance level or use Fibonacci extensions for projected price targets.
  • For short trades, set the take-profit at the next support level or use Fibonacci extensions to estimate downside targets.

6. Trade Management

• Risk-to-Reward Ratio: Aim for a minimum 1:2 risk-to-reward ratio. This ensures that your potential profit justifies the risk you are taking on each trade.
• Trailing Stop: Once the trade moves in your favour, consider using a trailing stop to lock in profits as the trend continues.
• Partial Profit-Taking: As the price reaches key levels of support or resistance, consider taking partial profits and allowing the remainder of the position to run.

Strategy Summary Table

Component	Details
Timeframe	Higher timeframe (Monthly) for trend direction; lower timeframe (Weekly) for entry signals
Trend Confirmation	Trend direction on the monthly chart (bullish or bearish)
Entry Trigger	Bullish or bearish reversal patterns on the weekly chart, aligned with the monthly trend
Stop-Loss	Below/above recent swing low/high or key support/resistance levels on the weekly chart
Take-Profit	Next support/resistance, Fibonacci extensions
Best Use Case	Forex, stocks, commodities during strong trends

Example: Bullish Monthly-Weekly Trend Strategy on EUR/USD

1. Step 1: Identify the Trend on the Monthly Chart:
   • EUR/USD is in a bullish trend on the monthly chart, confirmed by price being above the 50-month moving average and consistent higher highs and higher lows.
2. Step 2: Confirm Entry on the Weekly Chart:
   • On the weekly chart, price retraces to 1.1800 (a previous resistance level now acting as support).
   • A bullish engulfing candle forms, confirming that the bullish trend is likely to continue.
3. Step 3: Enter the Trade:
   • Enter a long position at 1.1810, with a stop-loss at 1.1750 (below the swing low) and a take-profit at 1.2000 (next resistance level).
4. Step 4: Exit the Trade:
   • The price moves up to 1.2000, hitting the resistance level, and the trader exits with a 2R profit.

Conclusion: Trade with the Long-Term Trend Using the Monthly-Weekly Strategy

The Monthly-Weekly Trend Strategy is a robust and reliable method for position traders and swing traders looking to align their trades with the dominant market trend. By combining monthly trend analysis with weekly entry signals, traders can increase their chances of success by trading with momentum, optimising their entries, and managing risk effectively.

To learn more about how to implement the Monthly-Weekly Trend Strategy in your trading, enrol in our Trading Courses at Traders MBA and enhance your trading skills for long-term success.