Analysis of previous deals:
30M chart of the EUR/USD pair
The EUR/USD pair passed from the low to the high of the day a little less than 40 points on Wednesday. Thus, the technical picture over the past day has not changed at all. Not only did the pair continue to trade exclusively sideways, it also began to ignore the lines of the last horizontal channel. Thus, even the forex guru would not find trading signals during the day. There is still no trend on the 30-minute timeframe. Accordingly, there is no trend line now, no trend channel. But today there was macroeconomic statistics and a speech by European Central Bank President Christine Lagarde. There is probably no need to pay attention since there was no market reaction to these events. In the chart below, all the most important events of the day are marked with check marks. The first two events hit the flat in a 16-point channel, the last event - the ISM business activity report in the US service sector - seemed to cause the euro/dollar to turn upward. But this index turned out to be much stronger than forecasts and was supposed to provoke a strengthening of the dollar (that is, a fall in the euro/dollar pair).
5M chart of the EUR/USD pair
On the 5-minute timeframe, Wednesday's movement does not raise any questions. The pair was flat during most of the trading day - the price circled around the level of 1.1585. Thus, short positions should not have been opened even when the quotes went slightly below this horizontal channel. If only because the probability of low volatility and outright flat remained. Plus, this departure took place just 45 minutes before the publication of the ISM index, which is considered a fairly important indicator. Moreover, its actual value (66.7) was not in line with the forecast (61.9), which should have provoked a reaction from traders. However, as we can see at the end of the day, traders saved their strength until the very evening. Because the results of the Federal Reserve meeting will be announced in half an hour, and in another half hour a press conference with Fed Chairman Jerome Powell will begin. Most likely, volatility will increase at this time, but novice traders should have already left the market, as uncontrolled and unpredictable movements may begin soon. Recall that the Fed is now expected to announce the curtailment of the quantitative stimulus program. If these words sound, then the euro/dollar pair may rush down.
How to trade on Thursday:
Volatility continues to remain very low on the 30-minute timeframe, and at this time there is no trend or horizontal channel. Therefore, the current movement is generally very difficult to describe in words: it is neither sideways nor trendy. The 30-minute TF is still not very convenient to trade, and we still do not recommend tracking signals from the MACD indicator. We advise you to wait for the formation of a trend line or trend channel. On the 5-minute timeframe, the key levels for November 4 are 1.1535, 1.1585, 1.1617 - 1.1622. 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. On Thursday, we advise novice traders to pay attention to Lagarde's speech and the economic forecast from the European Commission. With a 70% probability, these events will not be noticed by the markets, which will continue to be impressed by the results of the Fed meeting, but nevertheless, at this time, changes in the movements of the pair should be expected.
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