Analysis of Monday's trades:
EUR/USD 30M Chart
On Monday, November 15, EUR/USD was traded in a usual manner, being stuck in the sideways channel of 30 pips for most of the day. It can be clearly seen in the image below. However, in the late Amerian session, quotes started falling unexpectedly despite the fact that there have been no important macroeconomic releases. Still, market participants were actively buying the American dollar for no reason. As a result, EUR/USD shed about 80 pips for the day, thus demonstrating high volatility. Interestingly, Christine Lagarde's speech in the European Parliament, the only event that could have been of any interest to traders, has passed almost unnoticed. So, amid today's developments, the bearish bias remains valid. Moreover, the downward trend line has been formed. The pair has approached the level of 1.1371. Below it, no support levels can be found yet, as the quotes were last seen at this level at least one year ago.
EUR/USD 5M Chart
The 5M chart provides an even clearer picture. Before Monday afternoon, EUR/USD was barely moving, while later in the day, it suddenly started falling and broke the level of 1.1422. Near this level, the only trading signal of today was formed - the signal to sell. Normally, beginning traders would have used this signal. But this time, a wiser decision was to close all trades and exit the market without opening new ones. So, we ignored this signal, though it has proved to be profitable. There were no other trading signals during the day, as the pair barely moved in morning trades.
Trading plan for Tuesday, November 16
As seen on the 30M time frame, the downward trend remains valid, and a trend line has even been formed. However, traders need to pay attention to the fact that this trend line has no definite pivot points. Besides, the recent dollar's bullish run has no solid reason, so it will possibly end soon. However, it is worth buying the pair only after any certain buy signals appear or if the downward trend reverses. On the 5M time frame, the key levels for November 16 are 1.1371 and 1.1422. The take profit should be set at a distance of 30-40 pips while the stop loss is better to be placed 15 pips away from the breakeven point. On the 5M chart, the target can be found at the closest level unless it is not too close or too far. If it is, then it is better to focus on the Take Profit. On Tuesday, traders will pay attention to the EU GDP and Industrial Production reports, but they are unlikely to influence the market sentiment. Lately, the pair has been unaffected by the industrial production data while the secondary GDP estimate is unlikely to differ greatly from the first one. Markets have already priced in a 2.2% increase q/q. The United States will publish the retail sales data that can trigger some reaction but judging by today's developments, the dollar can rise without any reason.
The basic principles of the trading system:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.
6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.
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 are channels or trend lines that display the current trend and show which direction is better to trade.
MACD indicator (14,22,3) is a histogram and a signal line that shows when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.
Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, 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.
Beginning traders should remember that every trade cannot be profitable. The development of a reliable 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