Analyzing trades on Thursday
EUR/USD on 30M chart
On Thursday, EUR/USD completed a cycle of an upward movement and moved sharply down. It seems that the market has not received any confirmation that a peace treaty can soon be signed between Ukraine and Russia. For your reference, the uptrend of the euro started on Tuesday in parallel with the Russia-Ukraine negotiations that took place in Turkey. After the reports that the two sides had made noticeable progress, high-risk currencies received upside momentum. Yet, it turns out that this was a short-lived trend. Amid the uncertain time frames of when the peace treaty will be signed, markets quickly realized that this can take months. Until then, the so-called special military operation in Ukraine will go on and will continue to hurt the European economy. Thus, the fall of the euro is solely associated with geopolitics. There were almost no macroeconomic events on Thursday. The unemployment report in the EU and the data on initial jobless claims in the US were almost ignored by the market.
EUR/USD on 5M chart
On the 5-minute time frame, the pair's movements were far from perfect. Throughout the European trading session, the pair was holding in a trend. Yet, during the American session, the movements of the pair became ragged, making it hard to trade. The session started with the formation of a false buy signal. The price consolidated above the level of 1.1165 but failed to move higher by even 10 pips. Therefore, a long position brought a small loss to novice traders. On the other hand, the next sell signal turned out to be quite strong, and the pair went down by almost 100 pips in total to the level of 1.1070. It was possible to earn at least 70 pips on this short position. When falling towards 1.1070, the pair paused near the level of 1.1106. At first, it broke through this level but then bounced off it twice. However, the quote failed to consolidate above this level, which means that traders should have just stayed in their short positions. A rebound from 1.1070 could also have been used as it was a buy signal. After its formation, the price went up by 50 pips and settled above the level of 1.1106. Yet, it could not continue the uptrend and reversed back below the level of 1.1106. At this point, traders should have closed their positions. This trade brought a small profit, but in total beginners could have earned no less than 70 pips on Thursday.
Trading tips on Friday
On the 30-minute time frame, the pair started a correction within the ongoing uptrend. Unfortunately, there is no trendline or channel at the moment, so we can just assume that there is a certain trend. We added several new levels to the chart and removed the old ones as the price showed no reaction to them. The fundamental and geopolitical backgrounds confirm a new fall in the European currency. On the 5-minute time frame on Friday, it is recommended to trade at the levels of 1.1019, 1.1038, 1.1070, 1.1132, 1.1184, and 1.1228. You should set a Step Loss to break even as soon as the price passes 15 pips in the right direction. No important reports are expected in the EU on Friday. The US will release the data on the labor market and wages. The key report of the day will be the Nonfarm Payrolls. Although the geopolitical factor may diminish its importance, this report is usually always in the focus of attention.
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.
