Analyzing Friday's trades:
GBP/USD on 30M chart
The GBP/USD pair also corrected a bit on Friday, but compared to the euro, the pound has fallen much weaker against the dollar in the last 10 days. The pair managed to consolidate above the downward trend line, so at this moment the downtrend is broken. Consequently, the pound may start to rise again, but it will be illogical. We believe that the decline should continue regardless of the fundamental and macroeconomic background, but still, remember that the market does what it wants. If most of its participants start buying out of nowhere again, then the pound will rise.
The UK had nothing scheduled for Friday. Thus, traders could only react to Federal Reserve Chairman Jerome Powell's speech. He said that monetary policy is unlikely to tighten any further. Therefore, his rhetoric was dovish. The dollar did not fall too much and just corrected a bit. We are waiting for the decline to resume, despite breaching the trend line.
GBP/USD on 5M chart
There were 3 trading signals on the 5-minute chart, but they should've been ignored. The signals were formed near the area of 1.2420-1.2448, so each deal had a high potential of resulting in a loss. As for potential profit, volatility was 90 points, which is not so much. Overall, the volatility indicator has significantly decreased over the past few months, so it was difficult to count on big profits. Therefore, all three trading signals should've been ignored and you shouldn't have entered the market. Especially since the pound's rise is now less expected than its fall.
Trading tips on Monday:
On the 30-minute chart, the GBP/USD pair tried to break the downtrend, but the trend line was breached during Powell's speech. Therefore, this can be considered as a coincidence. We believe that the pound should extend its downward movement. On the 5-minute chart, the levels to pay attention to are 1.2171-1.2179, 1.2245-1.2260, 1.2351-1.2367, 1.2420-1.2434-1.2448, 1.2507-1.2520, 1.2597-1.2616, 1.2659, 1.2697. When passing 15 points in the correct direction, you can set the Stop Loss to breakeven. The UK has nothing scheduled for Monday, while Fed representatives will give speeches in the United States. We believe that Bullard, Bostic and Barkin will not mention anything new since Powell has already reported the most important things.
Basic rules 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.
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 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.comfrom Forex analysis review https://ift.tt/KBWr5ck
via IFTTT