Analyzing Tuesday trades:
EUR/USD on 30M chart
On Tuesday, EUR/USD continued to move upwards in its usual manner, that is, without any obvious reason to rise. On Tuesday, there was only one report worth mentioning, the GDP data in the EU. However, this was the second estimate for the third quarter, so it could not cause a strong reaction. What is more, the euro began to advance at least three hours before the publication. Besides, the actual reading was in no way positive for the euro. Although the EU economy has expanded by 0.2% and continues to grow steadily, this scope of growth is very moderate and cannot be viewed as positive. However, upon reaching the level of 1.0465, the pair dropped rapidly to the downside. I assume that this pullback has marked the start of a new downtrend. Despite the fact that all technical indicators confirm the continuation of growth, I think that EUR has been largely overbought lately, especially given the current unfavorable fundamental and news background.
EUR/USD on 5M chart
Several trading signals were formed on the 5-minute chart on Tuesday and most of them were good. The first signal emerged when the price broke through the level of 1.0354. Beginners might have missed this signal as the quote quickly reached the level of 1.0383. Then, a breakout of this level was another signal that should have been followed. After that, the price rose to 1.0433 and rebounded from it, thus creating a sell signal and generating 20 pips in profit. This sell signal turned out to be false as the price failed to approach 1.0383. Yet, the trade closed at breakeven following the Stop Loss activation. Next, the pair broke through 1.0433 but almost immediately ended up near the next level of 1.0465. It bounced off this level and formed another sell signal that should have been followed. In a few hours, the quote declined to the area of 1.0383 where traders could have taken a profit of 65 pips. Signals that were formed at the level of 1.0383 came in too late and should have been ignored.
Trading tips on WednesdayOn the 30-minute timeframe, the pair is moving upwards and is located far from the trendline. I still expect the pair to start a strong correction. However, the downtrend will start only when the price breaks through the ascending trendline. On the 5-minute chart on Wednesday, it is recommended to trade at the levels of 1.0123, 1.0156, 1.0221, 1.0269-1.0277, 1.0354, 1.0383, 1.0433, 1.0465, 1.0483, 1.0535, and 1.0582. As soon as the price moves by 15 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, Christine Lagarde will give a speech and may influence the current uptrend in the euro. The US will release some minor reports on retail sales and industrial production. At the moment, the pair is mostly influenced by the technical factor which means it can be rather volatile and its movement has no correlation with the macroeconomic or fundamental background.
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.