Analyzing Tuesday's trades:
EUR/USD on 30M chart
EUR/USD kept the uptrend on Tuesday, but at the same time, it has been between 1.0806 and 1.0867 for the past three days. Basically trading within the horizontal channel. The price works almost perfectly at the limit of this channel, so it can trade even in the flat. In general, the euro shows a desire to grow even when there are no reasons for that. For instance, there were no important fundamental or macroeconomic events on Monday and Tuesday, but entering a correction, which would be logical after settling below the ascending trend line, did not even happen. We already said that settling below the trendline itself is a signal to sell, but at the same time, not crossing 1.0806 can make this signal false. Everything depends on the market sentiment. Whatever the fundamental background, if the market refuses to sell, there will be no fall. That's why technical analysis, which visualizes what is happening in the market, is important.
EUR/USD on M5 chart
There were quite a lot of trading signals on Tuesday, but at the same time most of them did not lead to large profits, as they were formed in the flat. The pair rebounded twice from 1.0837 the European trading session. In the first case, it failed to reach the nearest target level, in the second case, it did it with minimal error. The first short position closed at Stop Loss at zero, the second one with profit of about 10 points. The buy signal at 1.0806 should have been used as well, and it was the best signal of the day. The price rose to 1.0867, from which it bounced back, ideally, by the middle of the US session. Unfortunately, the rebound was followed by a sharp fall, and this trade brought 20 pips of profit at the most. When the sell signal was formed, the price was near 1.0837, so beginners were able to wait till the break-down of 1.0837, to open the new short positions. By the evening, the price was able to go down again to 1.0806, so another 10 points of profit could be taken. As a result, it was possible to earn about 40 pips and not a single losing trade.
Trading tips on Wednesday:
The pair maintains an uptrend on the 30-minute chart, despite crossing the trend line. Now traders should wait for EUR to settle below 1.0806 in order to count on a stronger drop. On Wednesday, traders will start to receive macroeconomic information, so the pair could leave the horizontal channel. On the 5-minute chart, it is recommended to trade at the levels 1.0657-1.0668, 1.0697, 1.0736, 1.0787-1.0806, 1.0837, 1.0905, 1.0923-1.0933, 1.0966 and 1.0989. As soon as the price passes 15 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, the European Union is set to release its second inflation report for December, while in the US, retail sales and industrial production are set to be published. The reports are of secondary importance, but the Fed monetary committee members are also scheduled to speak tomorrow, which could be very interesting.
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.
