Analyzing Tuesday trades:
EUR/USD on 30M chart
On Tuesday, the EUR/USD trade was slow and sluggish. The volatility rate was just 50 pips, its lowest value in recent months. It seems that the market prefers to trade cautiously and sees no reasons either for selling or for buying the pair. The fundamental background remains the same. In the first two days of the week, there were no important events or reports. We mentioned before that representatives of the ECB and the Fed will make statements this week. So far, they haven't told us anything new. The market is already aware of the main agenda so there are currently no drivers. So, the quotes have settled below the ascending trendline which creates technical ground for the continuation of the downtrend. Yet, this movement may be very weak and slow.
EUR/USD on 5M chart
The 5-minute chart clearly reveals the nature of the pair's movement on Tuesday. Although there were some minor advances, the overall movement was flat. So, false signals were coming. In the best-case scenario, there should be no signals at all. But the reality was different. The price spent most of the day hovering in the area of 1.0269-1.0277 where the signals were formed. It took the pair several hours to break through this range. Yet, it failed to move in the right direction by even 15 pips. So, traders could not set a Stop Loss for this long position. Then, a similar sell signal was formed, and it also didn't allow beginners to set a Stop Loss to breakeven. As a result, novice traders could open two trades on Tuesday, and both of them were losing. This is hardly surprising for a flat movement.
Trading tips on Wednesday:
The uptrend has been canceled on the 30-minute time frame, just as we predicted a week ago. It is better late than never. This week, the pair may extend its decline even though there will be no macroeconomic or fundamental background. On the 5-minute chart on Tuesday, it is recommended to trade at the levels of 1.0093, 1.0123, 1.0156, 1.0221, 1.0269-1.0277, 1.0354, 1.0391, and 1.0433. as soon as the price passes 15 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, the EU and the US will both publish the data on manufacturing and services PMI. Most likely, the data won't show any considerable increase but the difference compared to the previous readings should not be too big. The US will also publish the report on durable goods orders and initial jobless claims. Yet, these reports are unlikely to greatly influence the market which may move by no more than 30-40 pips.
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.