Analysis of previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair corrected against the upward trend again on Monday. By the end of the day, the quotes of the pair were near the uptrend line. By the end of the day, the quotes of the pair were near the uptrend line, which already has as many as three pivot points. A new rebound from it can again provoke an upward movement. But hardly strong considering all the upward movement since December 8th. If the pair settles below the trend line, then the upward trend will be canceled, and the likelihood of a new drop in the British currency quotes will increase significantly. Thus, at this time, it should be noted that bulls are very weak. No important statistics released in either the US or the UK on Monday. This partly explains the very weak volatility of the pair - no more than 60 points. The euro/dollar pair, traditionally less volatile, passed about the same amount today.
5M chart of the GBP/USD pair
On a 5-minute timeframe, the movement of the pound/dollar pair was very complex on Monday and requires a detailed analysis. With the first signal - to sell - everything is simple. The price settled below the level of 1.3246, so novice traders should have opened short positions here. Unfortunately, the pair could not reach the nearest target level, but still went down 20 points. Therefore, newcomers had to also set Stop Loss to breakeven, at which the deal was eventually closed. Then the pair returned to the level of 1.3246 and settled above it. This moment could be interpreted as a buy signal, if only one more level at 1.3260 did not lie just 14 points higher. Thus, these two levels should be considered in conjunction, as an area of resistance. As a result, the pair did not assertively settle above this area, although the price was inside it for a very long time and made several attempts to gain a foothold above it. In the middle of the US trading session, the pair settled below the level of 1.3246, which should again be interpreted as a sell signal. The short position on this signal should have been closed after the target level 1.3208 has been worked out, from which the pair rebounded. Moreover, it was already evening time and the deal should have been closed in any case. Thus, the day ended in gains of about 25 points, which is not too bad.
How to trade on Tuesday:
At this time, the upward trend is maintained on the 30-minute timeframe, so the British pound may try to rise again tomorrow. The results of the Federal Reserve meeting will be announced on Wednesday evening and then it will be completely meaningless to predict how the pair will move further. But tomorrow you can still expect a logical movement, from a technical point of view. The important levels on the 5 minute timeframe are 1.3170, 1.3192, 1.3208, 1.3246, 1.3268, 1.3286 and 1.3310. We recommend trading on them on Tuesday. The price can bounce off them or overcome them. As before, we set Take Profit at a distance of 40-50 points. At the 5M TF, you can use all the nearest levels as targets, but then you need to take profit, taking into account the strength of the movement. When passing 20 points in the right direction, we recommend setting Stop Loss to breakeven. The UK will publish reports on unemployment, claims for unemployment benefits and average wages on December 14. We believe that the market reaction to this data will be minimal. Nothing interesting planned in America for 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 US 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 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.
