Having a bird’s eye view is a great way to get a wide swath of valuable information in life with regard to making decisions that have major impact upon things like health care, diet, home structure, etc. Peering through a larger lens helps to pull in additional important information to help choose directions that support more effective efforts at living the kind of life that you and your family desire. It is not much different with regard to the complexities of the trade. At the 35-thousand-foot level there are so many additional vantage points within view as you identify the salient pieces of information to assemble your trade plan.
Trading with Monthly Time Frames
In this brief article, I’ll be focusing on the monthly time frame as one of the ways to address the big picture in your charting. I have, and many traders still do, use the 15 – 30 – 60 – and 240-minute time frames to prepare, plan and execute the trade. To be clear, the small time frames can and do provide solid detailed data regarding the trend, supply/demand zones, the curve and entry, target, stop and exit decisions. However, smaller time-frames require more time and energy to trade due to their volatility (which becomes emotionally problematic for many traders). Additionally, the charts have a fractal quality (fractals appear the same at different levels), meaning that as the charts show elements of price-action movements in the smaller time frames so do the larger time-frames and, for a trend trader, this is golden.
4 Examples of the Benefits of Monthly Time Frame Trading
As a trend following trader, you’ll want to avoid sideways trends that are stuck in a range. This condition can be identified fairly quickly on a monthly chart. On the other hand, you can see the possibility of trends forming and you can analyze the overall market direction that would include which way stocks or currencies are proceeding. This is harder to do in smaller time frames.
Monthly charts can assist in supporting emotional management – an extremely important part of self-discipline. This is accomplished because you aren’t constantly bombarded by the huge, fast, volatile moves that happen on a daily basis in smaller time-frames. As you take a step back, you are able to detach more effectively from emotions and direct your decisions to which way the markets are trending. This added calm can also increase confidence when scouring for trading possibilities.
You are better able to see past false moves on a monthly chart. There is a lot of indecision at smaller time frames and traders can often become tricked into thinking the overall direction of the currency or stock is changing when so often this is not the case. By looking at the monthly chart, you can see that the chart is just experiencing a pull-back; a common occurrence in all markets.
Using monthly chats can help increase profit potential. The average trader can make a few pips from time-to-time on smaller time frames and never take advantage of compounding. There are throngs of traders that are happy to get a 30 pip move a day, and if that’s you it could be a wonderful thing. But, consider the potential of having up to 5 positions running on a long-term trend.