Analysis of Monday trades:
EUR/USD 30M Chart
On Monday, the EUR/USD pair carried on much as it did the previous week, with a daily volatility of just 45 points. But that's not entirely surprising. For starters, it's a Monday, and there wasn't any significant macroeconomic or fundamental news to influence the markets. In fact, for the past five business days, the pair hasn't seen volatility exceeding 65 points. It goes without saying that trading becomes challenging, if not somewhat futile, in such conditions. If the pair only shifts by 60 points in a day, you're looking at a best-case profit scenario of about 20 points. And these minor fluctuations? They play out in a short span, leading the pair to bounce back and forth, frequently changing its course throughout the day, often throwing in misleading signals.
Now, given that the price is comfortably sitting above its descending trend line, a slight bullish correction might be on the horizon. But all things considered, we're expecting a rather quiet and uneventful trading week ahead.
EUR/USD 5M chart
On the 5-minute time frame on Monday, we saw three trading signals form. Early in the European trading session, the pair rebounded near the 1.0871 mark and then surged to the 1.0901-1.0904 region, breaking through it. Long positions could have been closed when the price settled below this zone, yielding a 10-point profit. At this juncture, one could also have gone short, with the price grudgingly moving the 15 points downward required to set a break-even Stop Loss. The price later revisited the 1.0901-1.0904 zone, but no more signals emerged.
Trading strategy on Tuesday
Switching to the 30-minute chart, the pair continues its downward trajectory. From our perspective, the Euro's descent remains the most justified and logical scenario. We don't see any macroeconomic indicators potent enough to shift the market to a bullish sentiment anytime soon. The upcoming week's data will again be quite sparse. For the 5-minute chart tomorrow, keep an eye on these levels: 1.0733, 1.0761, 1.0835, 1.0871, 1.0901-1.0904, 1.0936, 1.0971-1.0981, 1.1011, 1.1043, and 1.1091. If the price moves 15 points in the right direction, consider setting a break-even Stop Loss. As for Tuesday, neither the EU nor the US have any significant events or publications scheduled. With nothing substantial to react to, we're likely in for another day of low volatility and minimal price movements.
Basic rules of a trading system:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good 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), then this is a support or resistance area.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels 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 recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginning traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.
