Analyzing Monday's trades:
EUR/USD on 30M chart
EUR/USD traded again with ultra-low volatility on Monday. The only significant movement was the price bouncing off the level of 1.0668, preserving the corrective phase. Considering the movement of the last five days, it has maintained a flat pattern. The pair has tried to surpass the level of 1.0668 four times, but still failed each time. This level is currently stopping the euro from falling further, which we expect.
There were no important events in either the European Union or the United States. European Central Bank Vice President Luis de Guindos spoke in the EU, but he did not reveal anything extremely important. However, this is clearly obvious as there was no market reaction. De Guindos admitted that additional tightening might be needed in the future, but the current level of inflation does not call for a rate hike. Indeed, inflation may accelerate slightly in the near future, but until that happens, there is no point in discussing it.
EUR/USD on 5M chart
On the 5-minute chart, there was only one trading signal. At the beginning of the US trading session, the pair bounced off the level of 1.0668 and then rose by 20 points. Therefore, a Stop Loss should have been set at break-even for a long position. However, the trade should have been closed manually anyway, as no other signals were formed. Alas, it was a dull day even if traders managed to make a small profit.
Trading tips on Tuesday:
On the 30-minute chart, the corrective phase remains intact, which may have already ended or is about to end soon. Take note that the pair remained stagnant for several weeks until the employment and unemployment data were released in the United States. And now it has been standing still for a week. The previous week worked in the dollar's favor, but the greenback's growth has been relatively weak. We expect a more significant decline in the pair. The key levels on the 5M chart are 1.0451, 1.0483, 1.0526, 1.0568, 1.0611-1.0618, 1.0668, 1.0733, 1.0767-1.0781, 1.0835, 1.0871. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. On Tuesday, the eurozone will release the second estimate of GDP for the third quarter, in Germany – the ZEW Economic Sentiment Index, and in the United States – the inflation report for October. The main agenda of the day is the US inflation data. This report can trigger the dollar's growth.
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.
