Another Trading Secret Revealed: The Monday Effect

Trading Monday morning

This is a term I coined to identify a forex trading pattern that I watch out for each week. I call it the Monday Effect and when it plays it, there are usually significant moves in the market. So, you need to be aware of the Monday Effect, which I reveal in the following article…

The Monday Effect occurs when the low or high for a currency is set on Monday and the market reverses direction in the latter part of the week (i.e. Thursday-Friday). This “Effect” can be especially strong when the low or high is set in early Far East trading but it can work no matter what time of day it occurs.

Whatever the reason, Monday Effects do work. I jot down the highs and lows each Monday and leave it next to my platform as the week winds on. If the high or low is broken or occurs on a non-Monday, I cross off the risk of this pattern for the week.

If the market starts to distance from the high or low, I raise my alert as you often see stops build from those underwater. Think about it. The farther a market moves from a Monday low/high for the week, the less likely to see major stops being run unless those levels are taken out, leaving the other side more exposed.

Note, the Monday Effect is like a setup and as with any setup, you look for signs that it will materialize into a trading pattern..