FX.co ★ Trading plan for EUR/USD on October 11. Analysis and simple tips for beginners

Analysis of Tuesday trades:

EUR/USD 1H chart

The EUR/USD currency pair maintained its ascent throughout Tuesday, aligning with our previous anticipations. We have consistently communicated our expectation for a further correction of the euro following its two-month descent. Notably, the initial two trading days of the week were devoid of any pivotal macroeconomic or fundamental events. To be precise, while events did occur, they scarcely influenced the market participants' sentiment. Indeed, Germany's industrial production report fell short of projections, thereby failing to bolster the euro. The European Central Bank (ECB) representatives have maintained a 'dovish' stance for several months, rendering Christine Lagarde's speech today incapable of inciting the euro growth.

The remarks from several Federal Reserve officials exerted a more substantial influence on the market, given the mention of a discretionary hike in the key rate not being obligatory until year-end. In the prevailing circumstances, this too qualifies as 'dovish' rhetoric, potentially subjecting the dollar to pressure from these words. However, even in the absence of statements from Fed officials, a decline in the dollar was anticipated.

EUR/USD 5M chart

On the 5-minute time frame on Tuesday, two trading signals were formed. Regrettably, the onset of the morning upward movement was missed, however, the rebound from 1.0611 served as a sell signal, thereby enabling novice traders to initiate a short position. The pair managed to descend approximately 25 points, which allowed for a break-even Stop Loss to be set. Subsequently, the pair reverted to the 1.0611-1.0618 zone, where the sell trade was closed due to the Stop Loss. Volatility remained low again today, thus limiting substantial earnings in any scenario.

Trading ideas for Wednesday:

On the hourly time frame, the pair continues to carve a new leg of its ascending correction. In the medium-term perspective, we anticipate a decline of the euro almost inevitably, yet a purely technical rise may persist for the next couple of days. On the 5-minute TF tomorrow, the key levels can be found at 1.0391, 1.0433, 1.0451, 1.0491, 1.0533, 1.0611-1.0618, 1.0673, 1.0733, 1.0767-1.0781, and 1.0835. Upon passing 15 points in the correct direction, a break-even Stop Loss can be set. On Wednesday, Germany will publish the final inflation report value, while the US will release the Producer Price Index and the minutes of the last Federal Reserve (Fed) meeting. All these indicators are fundamentally secondary and are unlikely to provoke any significant market reaction. Additionally, several Fed representatives will speak in the States, and if their rhetoric remains 'dovish', the pair will find grounds to continue its ascent.

Basic rules of a trading system:

1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.

4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.

5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.

6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.

How to read charts:

Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.

Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.

The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.

Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.

Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.