Analysis of Friday's deals:
30M chart of the EUR/USD pair.
The EUR/USD currency pair traded very poorly on Friday. Although during the day there were no important macroeconomic events that would concern the euro or the dollar, the pair traded quite volatile and changed the direction of its movement several times. It was these reversals, which could not be predicted, that spoiled the whole picture. The price ignored important levels and overcame them as if important statistics were being published at that time or there were important fundamental events. But there were none. But, as we assumed in previous articles, the downward trend resumed although the price had previously left the descending channel. The pair's quotes could not overcome the level of 1.1106, so a new round of downward movement has begun and now the pair is getting closer to its local lows. In general, there are grounds for this, since on Thursday the ECB again showed its "dovish" position on monetary policy, and the Fed next week may raise the key rate for the first time in three years.
5M chart of the EUR/USD pair.
On the 5-minute timeframe, the pair's movements on Friday look even worse. Four trading signals were formed at once near the 1.0990 level, which was considered strong, but three of them turned out to be false. Therefore, novice traders could open two deals on the first two signals near the 1.0990 level, and ignore all subsequent ones. Fortunately, the volatility was high on Friday, so in both cases, the price after the signal formation passed in the right direction by 15 points. This allowed newcomers to set Stop Loss at breakeven, so no losses were received on these false signals. As we have already said, the last two signals near the 1.0990 level should have been ignored. The sell signal near the 1.0932 level should also have been filtered out since it was formed too late. Therefore, in the end, the day was completed without profit, but also without losses, which is also not bad, given that now the market continues to be excited, which is expressed by increased volatility, sharp reversals. At this time, it is especially important not to forget about caution and trade only with Stop Loss. The downward trend persists due to the complex geopolitics in Eastern Europe and this state of affairs may be observed for a very long time.
How to trade on Monday:
On the 30-minute timeframe, the downward trend has been canceled, but a new downward trend has already been formed. There is no trend line or channel yet, but in the coming days, it will be possible to form either the first or the second. The US dollar is still in high demand in the market due to its status as a "reserve" currency, which plays a particularly important role in a difficult geopolitical situation. On the 5-minute TF tomorrow, it is recommended to trade by levels 1.0727, 1.0769, 1.0806, 1.0870, 1.0932, 1.0990, 1.1106, 1.1136. When passing 15 points in the right direction, you should set the Stop Loss to breakeven. On Monday, the European Union is scheduled to publish a report on industrial production for January, and in the States - the calendar is empty. Thus, tomorrow the market will have nothing to react to, but volatility may remain high. Friday showed us perfectly well that now is not the time for flat or low volatility.
Basic rules of the trading system:
1) The strength of the signal is calculated by the time it took to generate the signal (rebound or overcoming the level). The less time it took, the stronger the signal.
2) If two or more trades were opened near a certain level on false signals, then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade transactions are opened in the period between the beginning of the European session and the middle of the American session when all transactions must be closed manually.
5) On a 30-minute TF, signals from the MACD indicator can be traded only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as a support or resistance area.
What's on the charts:
Price support and resistance levels - the levels that are the targets when opening purchases or sales. Take Profit levels can be placed near them.
Red lines - channels or trend lines that display the current trend and show in which direction it is preferable to trade now.
MACD indicator (14, 22, 3) - a histogram and a signal line - an auxiliary indicator that can also be used as a signal source.
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market to avoid a sharp price reversal against the previous movement.
Beginners to trade in the forex market should remember that every transaction cannot be profitable. Developing a clear strategy and money management is the key to success in trading for a long period.