Analysis of previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair continued to trade inside the side channel on Tuesday, which is perfectly visible in the chart above. During the day, the pair was practically flat, although the volatility was still quite high - at least 80 points. For a day with an empty calendar of events, this is quite a lot. However, the key point right now is the horizontal channel. Recall that a horizontal channel has also been formed for the euro, so both major pairs are now in a flat, confirming their high correlation with each other. Thus, the pound continues to remain close to its 2-year lows and, just like the euro, cannot correct itself in any way. Based on this, one should wait for one of the borders of the horizontal channel to be overcome to determine the further trend. There were no important macroeconomic reports or fundamental events on Tuesday. There was nothing for traders to react during the day.
5M chart of the GBP/USD pair
On the 5-minute timeframe, only one trading signal was formed on Tuesday. The price bounced off the level of 1.2379 with a loss of 4 points and formed a sell signal. Four points is actually a lot to consider this "under-rebound" as a signal. Thus, novice traders had to decide for themselves whether to open short positions or not. If the deal was opened, then it was possible to earn about 50 points on it. The price failed to reach the nearest target level of 1.2250 during the day, so the deal had to be closed manually in the late afternoon. If the transaction was not opened, then no profit and no loss was received.
How to trade on Wednesday:
The downward trend still persists on the 30-minute timeframe. The pound has recently fallen in price by 700 points, and all its attempts to form a tangible correction ended in nothing. Even the growth of the British currency on Monday by 150 points cannot be considered a correction. So far, the pair cannot even overcome the level of 1.2409, let alone anything more. But now you still need to get out of the horizontal channel before counting on a new trend movement. On the 5-minute TF tomorrow it is recommended to trade at the levels of 1.2250, 1.2409, 1.2477, 1.2502. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. No important events are scheduled for tomorrow in the UK, and an important inflation report will be published in the US. We believe that the market may react quite violently to this report, so you need to be prepared for this.
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 American 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 (14,22,3) 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 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.
