Analyzing Friday trades:
GBP/USD on 30M chart
GBP/USD managed to show some growth on Friday, although the euro was falling on the same day. Nevertheless, sterling managed to grow using the same macroeconomic background. There was even an ascending trend line on the 30-minute chart, which is, of course, very weak and short-term. That is why on Monday the pair might easily fall below it, breaking the uptrend. And frankly, there is no trend, because recently the pound has been moving mainly sideways. However, as we said before, the situation may change dramatically next week, because of a whole bunch of different fundamental and macroeconomic events. The pound has been rising in general for several months without serious corrections, so we still expect a noticeable downward movement, but at the same time, if the market continues to refuse to buy the dollar, then it will not fall.
GBP/USD on M5 chart
As for trading signals on the 5-minute chart, the situation was quite complicated. The pair spent most of the day in the area of 1.2245-1.2260, going up and down 5-8 points from time to time. At the beginning of the US session, GBP fell due to the producer prices report, which traders usually ignore. It fell almost 100 points within 5 minutes, though usually it is very difficult to wait for a reaction that would cost 20-30 points. Moreover, the only normal signal near 1.2205 was practically impossible to use, because the quotes immediately rose. As a result, traders could try to use the last buy signal, when the price settled above 1.2260. The price failed to reach the target level of 1.2329 by literally a dozen points, but the deal could still be closed in profit closer to the evening.
Trading tips on Monday:
The pair is moving quite fiercely on the 30-minute time chart. Formally, we have a rising trend, but it is very weak, and next week the fundamental and macroeconomic background will be so strong that the pair may "fly" from side to side every day. On the 5-minute TF tomorrow, it is recommended to trade at the levels 1.1950-1.1957, 1.2064-1.2079, 1.2141, 1.2186-1.2205, 1.2245-1.2260, 1.2329-1.2337, 1.2371, 1.2471-1.2477. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Monday, the UK will release reports on the industrial production for October and the GDP with different interpretations. Not the weakest data, we expect a moderate market reaction to it.
Basic rules of the trading system:
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
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 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
