Analysis of Monday's trades:
30M chart of GBP/USD
On Monday, GBP/USD traded actively enough. Retreating, the pair failed to reach the ascending trend line. If it did, it would bounce off and produce a strong buy signal. Extending its upward move, the quote approached the 1.3210 level, which was tested last week. However, it was unable to break through it. The British pound is now at risk, like the euro. Simply put, they both are reserve currencies, like the US dollar. Therefore, in case of any geopolitical tension, like the present, the greenback is bought more often than either the euro or the sterling. This is the key reason why the currency is at risk now. Last week, the Bank of England and the US Federal Reserve both raised interest rates by 25 basis points. On Monday, no macro events happened in the United Kingdom. Fed Chairman Powell's speech caused no reaction in the market.
M5 chart of GBP/USD
In the M5 time frame, the technical picture looked similar to the one of EUR/USD in the first half of the day. During the North American session, the pound soared by 80 pips. Notably, the rise came for unknown reasons. It could have been just a technical correction. Several false signals were made near 1.3124 and 1.3134 on Friday, so they needed to be erased from the chart. Although no one saw it coming, but a single buy signal was formed around these levels on Monday. It was a profitable one and brought traders about 60-70 pips of profit. In other words, if beginners kept those levels on the chart, they would be given a strong signal to buy the instrument. The pair then advanced to 1.3210 where traders considered taking a profit. The 1.3210 level is currently of the utmost importance to the pound sterling. If the quote fails to break through the range, the downtrend will resume. However, the more frequently the pair approaches the mark, the higher is the chance of a breakout. This means bears are not ready to establish control over the market yet.
Trading plan for Tuesday:
In the 30M time frame, the pair is still moving up, supported by the trend line. However, the pair has encountered resistance at 1.3210. If the price breaks through 1.3210, the uptrend will continue. Otherwise, if it breaks through the trend line, the downtrend will resume. The target levels in the 5M time frame are seen at 1.3042, 1.3082, 1.3110-1.3126, 1.3210, 1.3241, and 1.3272. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction after a trade has been opened. No important releases are scheduled for Tuesday both in the Kingdom and the United States. Beginner traders will have nothing to focus on during the day. GBP volatility is currently not the highest nor it is the lowest. Therefore, the pair may show enough of a movement on Tuesday.
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 interpret charts:
Support and resistance levels can serve as targets when buying or selling. You can place Take Profit 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.
Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.
