Analyzing trades on Tuesday
EUR/USD on 30M chart
The EUR/USD trading was not perfect on Tuesday. The entire movement resembled a flat channel although there was a slight downward slope. Thus, we can say that the pair has started an upward correction which is still very weak at the moment. The descending channel is still relevant, but the price does not even move towards its upper boundary. Therefore, it is more likely that the pair will resume the downward movement with more force. The European currency is now looking for support, but there is nowhere to find it. There was almost no economic news on Monday and Tuesday, and the geopolitical background remains unfavorable for the euro. Therefore, a technical correction is the only thing the euro can count on. But as we can see, bears are reluctant to close their positions which could potentially lead to a pullback. On Tuesday, the EU published its third estimate of GDP for the fourth quarter. However, markets showed no reaction to it, and the report turned out to be as neutral as possible.
EUR/USD on 5M chart
On the 5-minute time frame, the pair was moving mainly sideways. All trading signals were formed around the same level of 1.0870, which is a clear sign of a flat movement. Thus, novice traders should have traded as carefully as possible. Given the descending channel on the 30-minute time frame, buying the pair was also risky. The first sell signal turned out to be false, as the price failed to decline even by 15 pips, which would be enough to set a Stop Loss to breakeven. Unfortunately, this signal was canceled only when the price consolidated above the level of 1.0870. This was a very unfavorable move for traders as the quote jumped immediately by 40 pips from one candlestick. Therefore, this trade ended with losses. The buy signal should not have been followed at all, since at the time of its formation the price had already risen by 40 pips. Traders could have used the next two signals although they'd better not. When these signals were being formed, two false signals had already appeared near the same level of 1.0870. Anyway, those who opened a buy trade could still get a profit of 10-20 pips, provided that they closed it manually. The quote failed to reach the target level of 1.0932.
Trading tips on Wednesday
On the 30-minute time frame, the downtrend is still in place. Therefore, it is better to stay bearish on the pair. Only when the price manages to consolidate above the ascending channel, will it be possible to consider long positions. In the near future, the pair may go through several more rounds of correction as there will be no macroeconomic data in the first half of the week. On the 5-minute time frame on Wednesday, it is recommended to trade at the levels of 1.0727, 1.0769, 1.0806, 1.0870, 1.0932, and 1.0990. You should set a Stop Loss to breakeven as soon as the price moves by 15 pips in the right direction.
On Wednesday, there will be no important economic events both in the EU and the US. Thus, the market will focus entirely on the geopolitical background. The escalation of the conflict in Ukraine may trigger another fall in the euro.
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.