Analysis of Wednesday's deals:
30M chart of the EUR/USD pair
The EUR/USD currency pair continued incomprehensible movements on Wednesday. The direction changes too often, there is no trend, the pair is clamped in a limited range, but at the same time, the movement cannot be considered a classic flat. In general, the most confusing situation. We advise you first of all to trade as carefully as possible in the near future. The range the pair is currently in: - 0.9900-1.0072. It is wide enough, so you won't be able to trade from border to border either. All local levels that could be formed by the local low and high are not worked out properly. The European Union just published a report on inflation, which showed a new acceleration in price growth to 9.1% y/y. It cannot be said that such a figure surprised at least someone, since inflation is now growing in many countries of the world, and the European Central Bank is doing too little so far to reduce it. Nevertheless, the reaction of the market followed. At first, the euro fell, then grew, and by the end of the day it was exactly at the same levels at which the day opened. Therefore, today we observed a typical flat, which, however, does not correspond to the concept of a flat in the context of the last 7-10 days. We repeat once again: the movements are now very strange and almost unpredictable.
5M chart of the EUR/USD pair
Five trading signals were formed on the 5-minute timeframe today. Everything is near the 1.0020-1.0034 area. Recall that this is a sign of a flat for beginners. And it is always very difficult to trade in a flat. Today's movement cannot be called trendy, as it was too weak and not one-sided. Let's try to figure out how to trade the pair. The first four signals are sell signals. It was necessary to open a short position on the very first one, and during the formation of the second one, keep it open. The most that the pair fell down was by 34 points, but failed to reach the nearest target level of 0.9952. Therefore, the trade was closed at Stop Loss when the price returned to the level of 1.0020 and bounced off it for the third time. In principle, after that it became completely clear that there would be no trend today, so all subsequent signals near the same area of 1.0020-1.0034 should not have been worked out. As a result, the day ended with zero profit, which is not so bad, given the nature of the pair's movement.
How to trade on Thursday:
The pair decided not to resume the downward trend on the 30-minute timeframe. Instead, it decided to stay some more time inside the 0.9900-1.0072 horizontal channel. Thus, before overcoming any of the channel boundaries, a flat can be observed. It has always been very difficult to trade inside the flat, which is once again proved by today. On the 5-minute TF on Thursday, it is recommended to trade at the levels 0.9900-0.9910, 0.9952, 1.0020-1.0034, 1.0072, 1.0123, 1.0156. When passing 15 points in the right direction, you should set Stop Loss to breakeven. The European Union will release an absolutely uninteresting index of business activity in the manufacturing sector (second value) and the unemployment rate (also not the most important report) on Thursday. Jobless claims and the ISM Service PMI in America. We believe that it is the ISM index that the market will pay attention to.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the US one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
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 the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) 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 lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, 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.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
