Analyzing Tuesday's trades:
EUR/USD on 30M chart
On Tuesday, EUR/USD traded rather turbulently, but maintained its uptrend. Strange as it may seem, volatility was not high, although the most important inflation report for February was published in the United States. Unfortunately (or fortunately), its value was quite neutral, which coincided exactly with the expected 6%. Thus, traders were not impressed by the report. So just at the moment when the report became available, there was a burst of emotions on the market, which quickly gave way to a smoother movement. In general, at the end of the day, the euro showed slight growth, and the single currency rose after the report was released. I think that it is a logical market reaction as the US inflation rate showed a significant slowdown again, which is dramatically decreasing the chances of tightening the monetary policy further. Recall that they already fell hard last weekend, when it became known that two big banks in the US went bankrupt.
EUR/USD on 5M chart
On the 5-minute chart, you can clearly see how the pair moved during the day. There were several reversals, but most of them occurred after the inflation report, which is not surprising. It was not advisable to open any positions at the beginning of the US trading session, as the CPI is too important to expect calm moves. It was only possible to stay in open positions, if by that time it was possible to use Stop Loss to Breakeven. And there were such positions. At first, the pair formed a sell signal, which turned out to be obviously false and resulted in a loss of about 15 points. Then a buy signal followed, which led to a breakthrough of 1.0737 and allowed earning about 30 pips. Traders could have taken this long position and held it at breakeven, and left the position open when the US inflation report was published. However, the result would have been the same, because the Stop Loss was not triggered, and the price returned to 1.0737 by the end of the day.
Trading tips on Wednesday:
On the 30-minute chart, the pair forms a new uptrend, but it may be short-lived, as it is based on market emotions. The trend line is quite formal, but consolidating below it may help determine the moment to enter a new spiral of movement to the downside. On the 5-minute chart, it is recommended to trade at the levels 1.0535, 1.0587-1.0607, 1.0692, 1.0737, 1.0792, 1.0857-1.0867, 1.0920-1.0933. As soon as the price passes 15 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, only minor reports will be released in the European Union and the US. The industrial production in Europe and the Producer Price Index and retail sales data in the US. There might be some minor reactions to the data, but it is unlikely to dramatically affect the market sentiment.
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.
