Analyzing Monday's trades:
GBP/USD on 30M chart
GBP/USD showed absolutely identical movements to EUR/USD on Monday. The same round of growth, then a round of decline. As I have already mentioned, these movements were not provoked by the macroeconomic background or other events, since there weren't any of those in the UK and the US. Therefore, the pair has been trading flat for two days and, if you do not take last Thursday into account, when the price fell by 250 points, then you'd see that the pair has also been flat for five days. It's just that at first it was the 1.2343-1.2444 channel, and now it's 1.2141-1.2260. Two attempts to cross 1.2141 did not lead to anything. As the New Year and Christmas holidays are approaching, I believe that both major pairs could switch to flat mode. Moreover, there will be practically no important events this week, and in the last week of the year, most traders may already leave the market. Thus, it will be possible to determine the resumption of the trend movement once GBP leaves the horizontal channel.
GBP/USD on M5 chart
Both the pound and novice traders were not that lucky, since the price crossed a much larger number of levels than the euro/dollar pair. In principle, the first sell signal near 1.2186 turned out to be false. It resulted in a loss of about 40 points. The second buy signal turned out to be formally correct, as the price almost reached the nearest target level of 1.2245, but 4 points of error... decide for yourself whether it was possible to consider this shortfall as "working off 1.2245". In any case, this level was only 40 points from 1,2205, so it would not have worked out much. All subsequent signals near the same area of 1.2186-1.2205 should have been ignored, since the first two signals turned out to be false.
Trading tips on Tuesday:
On the 30-minute time chart, the pound/dollar pair finally has a real chance of starting a downtrend, since GBP has crossed the ascending trend line. However, instead, it is still inside the horizontal channel and is trying to leave it through the lower limit. We believe that it may continue to fall despite the upcoming holidays, but the probability of a flat will grow every day. On the 5-minute TF on Tuesday, 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, 1.2337-1.2343. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. There are no important events or reports in the UK or US. Thus, we will wait for further downward movement, but GBP can't fall further if it doesn't cross 1.2141.
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.
