Analysis of Monday's trades:
30M chart of EUR/USD
On Monday, EUR/USD traded horizontally due to an empty macroeconomic calendar in the US and the eurozone as well as a lack of any fundamental factors able to somehow affect the market. Any price movements and volatility are usually untypical for Mondays. In general, the pair is still in a downtrend that is no longer as strong as it used to be. Traders are now more cautious when selling. Anyway, a bearish continuation is likely. The last two weeks of February are going to be rather uneventful. The world central banks will announce new rate decisions in March, and future trends of major currency pairs will depend on that. There is currently neither a trend line nor a channel. The pair is moving down in a sluggish manner.
5M chart of GBP/USD
No trading signals were generated on Monday. The pair traded horizontally in the 1.0669-1.0697 range, i.e. a 30-pips sideways channel. Therefore, there was no point in trading for beginners. Rather, they should wait until the price leaves the channel. In fact, that could happen even without any fundamentals and macro data coming. Volatility will increase once Monday is over anyway. On Tuesday, a few interesting reports are set to be released, which could have a strong influence on the pair.
Trading plan for Tuesday:
In the M30 time frame, there is a bearish continuation. This is also a weak movement with frequent corrections, and therefore it is hard to price. Volatility is low. The macroeconomic calendar for the coming weeks will contain only reports of secondary importance. So, this is going to be an uneventful and quite boring couple of weeks. In the M5 time frame, levels 1.0535, 1.0587-1.0607, 1.0669, 1.0697, 1.0792, and 1.0857-1.0867 stand as targets. A Stop Loss should be set at the breakeven point as soon as the price passes 15 pips in the right direction. On Tuesday, the eurozone and the US will see the release of their manufacturing and services business activity data. The reaction of the market to these reports will depend on how actual results will differ from forecasts. If they come in line, no reaction will follow at all.
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 breakout). The shorter this period, the stronger the signal.
2) If two or more trades are opened at some level following false signals, i.e. those signals that do not drive the price to a Take Profit level or the nearest target, any consequent signals near this point should be ignored.
3) During a sideways trend, any currency pair may form a lot of false signals or produce no signals at all. In any case, a sideways trend is never the best condition for trading.
4) Trades are opened in the time period between the opening of the European session and the middle of the North American one when all trades should be closed manually.
5) We can pay attention to signals coming from the MACD in the 30M time frame only if there is 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), that is an area of support or resistance.
Indicators on charts:
Support and resistance levels can serve as targets when buying or selling. You can place a 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 important to trade as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginner traders should remember that not all trades will be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.
