Analysis of Monday's trades:
30M chart of EUR/USD
The EUR/USD pair recouped losses on Monday as it showed a sluggish movement on Friday without any strong and accurate signals produced. On Monday, however, several accurate signals were formed, according to the chart below. In the M30 time frame, a corrective move began due to an empty macroeconomic calendar. Nevertheless, volatility remained relatively high - about 90 pips. Such volatility is not typical of the euro/dollar pair. Moreover, there were no macro events set for release on Monday. Given all the current geopolitical issues, this seems to be the new reality. Therefore, the upward correction is likely to be short-lived. No improvements have been reported on the geopolitical front although hopes for a breakthrough in Russia-Ukraine peace talks have grown. It is important right now that the parties achieve a ceasefire.
M5 chart of EUR/USD
In the M5 time frame on Monday, a few trading signals were made, but all of them were very accurate. The first buy signal had been produced at 1.0902 (the Friday low), even before the European session opened. This signal was not mentioned in the previous analysis, so it could have been ignored. The second buy signal was generated near the 1.0932 level after the price had risen some 40 pips, tested the 1.0990 mark, and pulled back. So, beginner traders were able to receive a 40 pips profit on Monday. After a pullback from 1.0990, a sell signal was also made. The pair went down to 1.0932 but failed to reach it. Nevertheless, the novice had enough time to close the trade manually. The buy signal from the 1.0932 level was not considered because an error of 3 pips was too much for the euro/dollar pair. As a result, the price returned to 1.0990 by the end of the day, but a signal was produced a little too late, so it should have been ignored.
Trading plan for Tuesday:
In the 30M time frame, a new downtrend emerged. So far, neither a trend line nor a channel has formed. If the price fails to break through 1.0990 on Tuesday, either a trend line or a channel will emerge. The target levels in the 5M time frame are seen at 1.0870, 1.0902, 1.0932, 1.0990, and 1.1106. A stop-loss order should be set at the breakeven point as soon as the price passes 15 pips in the right direction. In the eurozone, data on industrial production for January and the ZEW sentiment index will be released. In the United States, no events are expected due to an empty macroeconomic calendar. The eurozone statistics is of secondary importance and will unlikely somehow affect the market. Nevertheless, volatility is anticipated to be rather high due to current market jitters.
Basic principles of the trading system:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.
6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.
How to interpret a chart:
Support and resistance levels can serve as targets when buying or selling. You can place Take Profit near them.
Red lines are channels or trend lines that display the current trend and show which direction is better to trade.
MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.
Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.
