Analyzing Tuesday's trades:
GBP/USD on 30M chart
At the end of Tuesday, GBP/USD tried to resume its downward movement and initiate a correction. In the end, neither happened. In the first half of the day, the British pound gradually fell, even though there was no substantial reason for it, while in the second half (after the disappointing JOLTs figures in the US) it rose, which was logical. As a result, the pair managed to move just 60-70 pips away from last week's lows, which clearly isn't indicative of a correction. As we've mentioned, there's a lot of crucial data this week, so the movements can be entirely unpredictable. In general, the British currency has no strong grounds for a sharp growth, but corrections should happen occasionally, and the US economy also periodically stumbles due to the high Federal Reserve rate.
GBP/USD on 5M chart
Three indistinct signals were formed on the 5-minute chart, and the movements were chaotic. During the European session, a sell signal was formed in the 1.2605-1.2620 range, after which the price fell by about 30 pips. This was enough to set a Stop Loss to break even, but the pair couldn't reach the closest target level. Thus, the trade likely closed at break-even. This was followed by an indistinct bounce from the mentioned range and a new downturn, even though the macroeconomic background supported the pair's further growth. This time, the price couldn't even move 20 pips in the right direction. The trade closed at a small loss when the price returned to the 1.2605-1.2620 range. The third buy signal related to this range should have been ignored.
Trading tips on Wednesday:
On the 30-minute chart, the GBP/USD pair broke out of the sideways channel and may now continue the downward movement. We're still leaning towards a further decline in the British pound, believing it's currently overbought and unjustifiably pricey. This week's macroeconomic backdrop will be quite strong, so the pound could move in either direction. The key levels on the 5M chart are 1.2372, 1.2457, 1.2488, 1.2543, 1.2605-1.2620, 1.2653, 1.2688, 1.2748, 1.2787-1.2791. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Wednesday, there's nothing particularly noteworthy slated in the UK. The US will release two reports, which under certain circumstances can provoke a market reaction – ADP and GDP. We believe the ADP report has a higher chance of having a resonant factual value.
Basic trading rules:
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 showing 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.
Beginners 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.
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