Analyzing trades on Thursday
EUR/USD on 30M chart
On Thursday, conditions for trading EUR/USD were much better. As we have mentioned before, a clear trend movement is the best moment for trading. Lately, we have been observing a full-fledged trend. Volatility is still high, so the pair does not trade sideways or pass just 40-50 pips during the day. This means that now is a pretty good time to trade. However, there are still some difficulties. The main problem is that today markets almost fully downplay the macroeconomic background and rarely react to fundamental factors. For example, yesterday and today, all macroeconomic reports from the US and the EU were ignored. The reaction to Jerome Powell's speech last night was rather weak as well. The US dollar lost ground only for a couple of hours and then resumed its growth. Thus, the downtrend on the euro/dollar pair continues.
EUR/USD on 5M chart
On the 5-minute time frame on Thursday, the pair was trading flat in the first half of the day. Yet, in the afternoon, it started a new round of decline. Although this fall was weak, several trading signals were formed during the day. There were just a few of them and all could bring profit. We are talking about two sell signals. At the very beginning of the European session, the price rebounded from the level of 1.1106 and then rushed to the downside. In the middle of the American session, the pair managed to test and overcome the level of 1.1059, after which it continued to fall. Therefore, beginners should have opened only one sell trade on Thursday. This position should have been closed manually below the level of 1.1059 in the late afternoon. Moreover, a new speech by Fed Chairman Jerome Powell was scheduled around this time, which was a potentially negative factor for the US dollar. It was possible to earn about 40 pips on a single trade, which is a very good result in these turbulent times.
Trading tips on Friday
A downtrend has formed on the 30-minute time frame and it is still relevant. However, given the instability of the markets due to the geopolitical situation, the price movements can be very volatile with sharp reversals. You should be as careful as possible and do not forget to set Stop Loss orders. In general, we expect the downward movement to continue for the next few weeks. On the 5-minute chart on Friday, we recommended trading at the levels of 1.0990, 1.1059, 1.1106, 1.1136, and 1.1165. You should set a Stop Loss to breakeven as soon as the price passes 15 pips in the right direction. On Friday, the EU will publish one report on retail sales, which is 99% likely to be ignored by the market. In the US, the important Nonfarm Payrolls report will be released, which will be the key event of the day. We believe that only the Nonfarm Payrolls report is likely to cause reaction in the market, although the data on US unemployment and wages will also be released. Yet, this data is of minor importance. At the moment, the geopolitical situation is the major focus of market players.
Basic rules of the trading system
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
On the chart
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.