Analysis of Thursday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair fell on Thursday. The tone for the downward movement was set on Wednesday evening, when the results of the Federal Reserve meeting were announced. We have already figured out why it provoked the dollar's growth, and not vice versa, however, take note that the dollar rose even more on Thursday than the previous day. In the morning, the market continued to work out the results of the Fed meeting, as Europeans were deprived of such an opportunity the previous night. Well, in the afternoon the results of the Bank of England meeting were announced. Despite the fact that the British central bank also raised the rate by 0.75%, the rhetoric of BoE Governor Andrew Bailey was so controversial (not dovish, but contradictory) that the market was even a little confused, not knowing how to react. We don't think the BoE meeting was weak or disappointing for the pound to fall more than 200 points during the day. We believe that the market reaction was illogical and unreasonable. Nevertheless, we warned you that the movements can be absolutely arbitrary and unpredictable. We got quite a logical reaction from the market on Wednesday evening, and an absolutely illogical one on Thursday. Indeed, there was an excellent trend movement throughout the day, so novice traders could make good money. In addition, the downward trend continues.
5M chart of the GBP/USD pair
On the 5-minute timeframe, the first sell signal was formed when the price broke the level of 1.1356. It is a pity that the beginning of this movement could not be caught. However, even before the announcement of the results of the BoE meeting, the price dropped to the level of 1.1236, from which it rebounded. Therefore, a short position should have been closed, the profit was at least 80 points. But it was obviously not necessary to work out a buy signal near the level of 1.1236 or the next sell signal. The fact is that around this time the results of the BoE meeting should have become known, so the pair could move in any direction and there was no need to take risks. The last sell signal near the 1.1200-1.1236 area could have been worked out, but it brought no more than 10-20 points of profit. Toward evening, this position should have been closed manually. Nevertheless, about 100 points could be obtained, which is an excellent result.
How to trade on Friday:
The pound/dollar pair maintains a downward trend on the 30-minute TF and continues to move down. Traders are waiting for a new interesting macroeconomic background, which can provoke new flights for the pair. It is impossible to predict what the reports will be in the US, so Friday's movements, as well as on Wednesday and Thursday, can be almost anything. On the 5-minute TF on Friday it is recommended to trade at the levels of 1.0927, 1.1061, 1.1200-1.1211-1.1236, 1.1356, 1.1443, 1.1479. When the price passes after opening a position in the right direction for 20 points, Stop Loss should be set to breakeven. The UK is set to publish only the index of business activity in the construction sector. There are much more significant unemployment reports and NonFarm Payrolls in America, which can provoke a strong market reaction.
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 positions 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 positions are opened in the time period between the beginning of the European session and until the middle of the US one, when all positions 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.
