Analyzing Tuesday's trades:
EUR/USD on 30M chart
EUR/USD faced strong negative pressure on Tuesday. Yesterday, we mentioned that it was illogical for the euro to display such significant growth on Monday. There were no influential events or economic reports that could have triggered such growth. However, from a technical perspective, the rise was absolutely logical, and we were expecting the second leg of the upward correction. The pattern was almost repeated on Tuesday. The eurozone data were disappointing, but not to the extent that the euro should lose 100 pips in a day. More likely, the market simply ended the correction. If this is the case, the pair will breach the trendline, and the downtrend will resume in the medium-term.
EUR/USD on 5M chart
On the 5-minute chart, two trading signals were generated. In the morning, the price breached the 1.0673 level, where beginners were supposed to open short positions. And at the beginning of the US trading session, the pair breached the 1.0611-1.0618 range. There were no buy signals formed until the end of the day, so traders should have closed the position manually closer to the evening. The profit from this trade was at least 65 pips.
Trading tips on Wednesday:
On the 30-minute chart, the pair continues its upward movement, which may be abrupt and unstable, representing a correction. We have repeatedly mentioned our expectation of a decline in the euro in the medium term, and it may have already started. We can confirm this once the pair breaches the trendline. The key levels on the 5M chart are 1.0391, 1.0433, 1.0451, 1.0483, 1.0533, 1.0559, 1.0611-1.0618, 1.0673, 1.0733, 1.0767-1.0781, 1.0835. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. On Wednesday, European Central Bank President Christine Lagarde and Federal Reserve Chairman Jerome Powell will speak. Traders may also look to the release of data on new home sales in the US. The main item on the day's agenda will be Powell's speech, which already caused a "storm" in the foreign exchange market last week.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
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 represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
