Analysis of Tuesday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair also corrected very strongly on Tuesday, if we consider this movement within a day. Growth amounted to at least 160 points, and we believe that this is even too strong a fall in the US currency due to only one report on business activity in the services sector. In fairness, take note that the dollar began to fall a bit earlier than the release of macroeconomic statistics in the US. Nevertheless, the pair has gone through most of its way up just after the release of this report. But in any case, 160 points is a lot. Such a movement of the pair shows after the meetings of the central banks. Therefore, we believe that there was also a technical influence on the pair's movement during the day. The fact is that the pound has been falling almost non-stop over the past week and a half, so to some extent it turned out to be a bit oversold. This does not mean that the downward trend will now end, especially since the price, even after today's correction, remains below the downward trend. To be more precise, today it rebounded from its lower border. Thus, we would not draw hasty conclusions and consider buying the British currency not earlier than consolidating above the channel. Moreover, the latest reports on business activity in the UK also turned out to be not the best.
5M chart of the GBP/USD pair
On the 5-minute timeframe, the pound/dollar pair moved most of the daytime, oddly enough, in a flat. The pair continued to fall at the beginning of the European trading session, then corrected slightly, and then a flat began, which lasted at least six hours. Quite a lot of trading signals were formed near the level of 1.1759 during this time, which was recognized as irrelevant by the end of the day. Therefore, novice traders could open two positions on these signals, which did not bring them profit. Nevertheless, one could earn several tens of points on the first sell signal near the same level of 1.1759, which could offset the losses on the next deals. The problem now is that the pound/dollar pair is at its lowest levels in the last two years. Therefore, there are very few levels around which one could expect the formation of signals. And the target levels are even smaller. Accordingly, the signal may not be false, but traders simply do not have levels around which they could take profits. This point should be taken into account when opening any positions on the pound/dollar pair in the near future.
How to trade on Wednesday:
The pound/dollar pair continues to follow a downward trend on the 30-minute TF. Therefore, there should be no questions about the pair's movement now, in principle, even despite the correction. Most of the factors remain in favor of the US currency, so the pound can safely continue its fall. It is recommended to trade at the levels of 1.1716, 1.1807-1.1827, 1.1898, 1.1967 on the 5-minute TF. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. There will be no major events or reports in the UK on Tuesday. Therefore, it will be possible to rely only on the report on orders for durable goods in the US. We do not believe that there will be a reaction to this report, but still it should not be overlooked.
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 (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.
