Analyzing trades on Tuesday:
EUR/USD on M30 chart
On Tuesday, EUR/USD extended its upward movement which was initiated a few days ago. A new ascending trendline that supports the bullish trend has been formed. However, the entire short-term uptrend looks so unconvincing that the euro is unlikely to strengthen properly in the coming weeks. Indeed, the European currency has advanced by 200 pips in three days. But in fact, this does not change anything. Of course, the pair can't move in one direction all the time. However, we are trying to determine long-term prospects of the pair or intraday signals that can be used for trading. So, the current advance of the euro does not seem reliable at the moment as the fundamental and geopolitical factors remain extremely challenging. Therefore, the euro is likely to resume its fall in the next few weeks. There was only one major report on Tuesday showing industrial production in the US. The indicator rose by 0.4% on a monthly basis but this caused no reaction in the market just as I predicted.
EUR/USD on M5 chart
On the 5-minute time frame, the pair was clearly trading in the sideways channel between 0.9807 and 0.9877 for the whole day. The volatility level was just 60 pips. So it was clearly a flat movement. There were enough trading signals formed during the day as we had three levels near which the pair was trading. Yet, the distance between 0.9845 and 0.9877 was very short. Therefore, all signals emerging in this area should have been ignored as the price immediately returned to the nearest level. The distance between 0.9845 and 0.9807 was nearly 40 pips which is not so much but still enough to open trades. All in all, there were two relevant trading signals that could have been followed. In the middle of the European session, the price broke through 0.9845 and moved down by 16 pips. So, you should have set a Stop Loss at the breakeven point for the short position as the trade closed with no losses or profit. The second sell signal that was formed at 0.9845 should not have been followed at all as it became clear by that time that the pair was trading flat.
Trading tips on Wednesday
The pair is rising on the 30-minute time frame but it is very hard to say now whether this growth will continue and how strong it can be. The ascending trendline has been completed but the price may break through it as soon as tomorrow as this line looks very weak. Besides, the quote failed to break through the level of 0.9877 after two attempts. On the 5-minute chart on Wednesday, it is recommended to trade at 0.9636, 0.9709, 0.9807, 0.9845, 0.9877, 0.9952, and 1.0020. As soon as the price moves by 15 pips in the right direction, set the Stop Loss at breakeven. Today, the EU will publish the inflation report, probably the most important report of the week. However, the market reaction may be weak as this is the second inflation estimate for September, and market participants are ready to see the reading of 10.0% year-on-year.
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.
