Analysis of Wednesday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair "flew" in all directions again on Wednesday. The volatility of the day was 300 points, so it is clear that the market is still in an excited state. And that's putting it mildly. Volatile movements were provoked by the Bank of England's announcement, which was unexpected for the market, about emergency measures that will be designed to stabilize the financial situation on the markets. The central bank said that in the coming weeks it will buy up long-term treasury bonds in any volume. But what matters to us is not the fact of buying up bonds, but the fact that the economic situation in Britain is already such that the central bank has to take emergency measures. And this means that everything is bad. However, the pound at the moment has not fallen in price in relation to the opening level of the day. But at the same time, it is still not far from its absolute lows, and so far it can hardly be said that the downward trend is nearing its end. Moreover, the market continues to be in an almost shock state due to a whole group of factors. Recall that the explosion of the Nord Stream pipeline was announced on Tuesday. So far, it is not clear who is behind this, but no one doubts that this is a sabotage. An investigation is underway. We have no doubt that this terrorist attack is a piece of the puzzle of the geopolitical picture that we have been observing in the last 7-8 months.
5M chart of the GBP/USD pair
You can clearly see on the 5-minute timeframe exactly how the pair "flew" during the day. It was impossible to predict the movement after the BoE's statements, since no one was waiting for these statements, and they were not announced. Despite the small number of levels in the current price area, one trading signal was still formed on Wednesday - a rebound from the level of 1.0833. At the time of closing the candle of this signal, the price had already managed to go down by "only" 100 points, so it was risky and dangerous to enter it. The 1.0538 level is new - Wednesday's low. The levels are gradually increasing, so in the coming days we can count on more signals. However, if the pair continues its "flights", then it will be quite dangerous to trade it.
How to trade on Thursday:
The pound/dollar pair maintains a downward trend on the 30-minute TF. The descending trend line is now quite formal, since the price is located 600 points from it. The market is slowly bouncing back, but it can still "explode" at any moment. A new "storm", as we see, did not have to wait long. Geopolitics remains in first place for market participants, and it is impossible to predict when this or that news on this topic will arrive. Therefore, be prepared for new "flights". On the 5-minute TF on Thursday, it is recommended to trade at the levels of 1.0355, 1.0538, 1.0833, 1.0927, 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 scheduled for Thursday in the UK, and only a few minor reports will be published in the US. However, the pound continues to go through 200-300 points a day, so the market definitely does not need the help of macroeconomics or "fundamentals".
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.
