Analyzing Friday's trades:
EUR/USD on 30M chart
On Friday, EURUSD failed to continue its downward movement or resume the uptrend. At the beginning of the US session, traders reacted to the US reports, but their reaction was relatively formal. It resulted in a daily volatility of approximately 60 pips. Overall, we are not entirely sure what exactly triggered the market's relatively strong reaction. Was it the reports on personal income and spending of the US population, which hardly differed from the forecasts? Only the University of Michigan Consumer Sentiment Index turned out to be significant and it was even worse than traders' expectations. Maybe this could have prompted the dollar's fall. But then again, the market had already started moving before this report was released.
EUR/USD on 5M chart
On the 5-minute chart, you could see that the pair changed direction several times and couldn't determine which way to move. During the European session, one trading signal was generated when the price settled below the 1.0559 level. This signal could have been executed, but the price failed to fall by even 15 pips. However, at the beginning of the US session, one should have been prepared for a reversal, so the trade could have been closed at breakeven. Then, a buy signal was formed around the same level, and in this case, the price was up by more than 15 pips, so there couldn't have been any loss. It was advisable to manually close the trade closer to the evening, but the profit's size depended on the time when the trade was closed.
Trading tips on Monday:
On the 30-minute chart, the pair has consolidated below the ascending trend line, which means that the euro can move downwards. EUR/USD may fall as early as the end of this week, but it seems the market is considering an upward retracement before it decides to bring back the downtrend. We believe that a new wave of the euro's decline is possible this week. 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 Monday, there are no important events planned in the European Union and the United States, with only Germany releasing a preliminary report on inflation for October. This report may stoke some volatility since inflation may slow down to nearly 4%, which is nearly in line with US inflation, but with a much lower ECB rate.
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.
