Analysis of previous deals:
30M chart of the EUR/USD pair
The EUR/USD pair resumed its upward movement on Friday, which made it possible to form a new upward trend line. Thus, at this time, an upward trend has formed, which allows us to count on further strengthening of the euro. Unfortunately, so far the bulls are very weak and hardly push the pair up. However, purely theoretically, a lot can change next week, since two important meetings of the European Central Bank and the Federal Reserve will take place at once. And now we can only guess what will be the markets' reaction to these events. In theory, everything is easy and simple: if there will be a tightening of monetary policy by one bank or another, there will also be an increase in the national currency. In reality, everything can be exactly the opposite. For example, like on Friday, when the US inflation report showed another acceleration, but this time the dollar did not grow against the euro, as it did in previous times.
5M chart of the EUR/USD pair
On the 5-minute timeframe, the picture on Friday was quite interesting and definitely deserves a careful, detailed analysis. There were several trading signals. And they all formed in the afternoon. The pair also moved quite well in the European trading session, in a trend, but never broke or rebounded from any of the levels. Thus, the first buy signal was formed upon a rebound from the level of 1.1266. And its novice players had to work it out with a long position. Further, literally an hour later, a report on inflation in the United States would be released. By that time, the pair had grown by 10 points, so it would be most expedient to set Stop Loss below 1.1259 (not breakeven!) And hope for the pair to grow. The quotes jumped to the level of 1.1307 immediately after the inflation report was published and rebounded from it. Therefore, long positions should have been closed here (profit was 20 points). But there was no need to rush to open short positions, since an important report had been published literally ten minutes before, and a long position had been opened even earlier. You shouldn't have taken risks with a short position. The same applies to the second rebound from the 1.1307 level, which happened immediately after the release of the consumer sentiment index from the University of Michigan, because the previous sell signal from the 1.1307 level turned out to be false. The signal to buy to overcome the level of 1.1307 was formed too late, so it should have been filtered out.
How to trade on Monday:
There is now an uptrend line on the 30-minute timeframe, so bounces from it can be worked out with long positions. Consolidating below it will break the upward trend. The key levels on the 5-minute timeframe for December 13 are 1.1186, 1.1227 - 1.1234, 1.1266, 1.1307, 1.1344, 1.1348-1.1355. Take Profit, as before, is set at a distance of 30-40 points. Stop Loss - to breakeven when the price passes in the right direction by 15 points. At the 5M TF, the target can be the nearest level if it is not too close or too far away. If it is, then you should act according to the situation or work according to Take Profit. No important statistics planned either in the European Union or in the United States on Monday. Thus, most likely, the volatility will not be strong tomorrow.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the American one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
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 the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) 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 lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, 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.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com