Analysis of Monday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair fell almost 500 points during the day, and then rose by almost 600 points. Such hyper volatility, from our point of view, was not provoked by any fundamental, political or geopolitical events. We believe that the market was (and may still be) in a state of shock and panic, which began last week thanks to two meetings of central banks, as well as news about the mobilization in Russia, which, in fact, put an end to the truce between Ukraine and Russia in the near future. It was this news that provoked hyper volatility. As for the validity of the pound's decline, we believe that it wasn't valid. The Bank of England raised the rate, the Federal Reserve also raised the rate, and geopolitical news, of course, is very important, but still, the loss of almost 1,000 points in two days is too much. In any case, now we need to wait for the market to calm down. Of course, with a volatility of 600 points per day, you can make very good money, but you can also suffer significant losses. The pound has fallen to its absolute lows, so there are practically no levels to trade in this price area. The trend line is so far away from the price that it barely made it into the chart.
5M chart of the GBP/USD pair
Not a single trading signal was formed on the 5-minute timeframe. And how could they be formed if the pair has never been at the current price values in its history? The 1.0355 level is now the pair's new all-time low. The day's high can still be formed, which can be taken into account when opening trading positions on Tuesday. In general, the situation on the market is panicky so far, so we recommend being highly cautious in any case.
How to trade on Tuesday:
The pound/dollar pair continues to fall on the 30-minute TF, which is visible even without a trend line. The geopolitical situation worsened, and the results of the meetings of the BoE and the Fed, although not completely and unequivocally in favor of the dollar, nevertheless provoked a new fall in the pound. The pound may "fly" from side to side for several more days and show hyper volatility. On the 5-minute TF on Tuesday it is recommended to trade at the levels of 1.0354, 1.1211-1.1236, 1.1356. When the price passes after opening a position in the right direction for 20 points, Stop Loss should be set to breakeven. There are no major events or reports set for Tuesday in the UK. A report on orders for durable goods in America, which is now hardly interesting to the market.
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.
