Analyzing Wednesday's trades:
GBP/USD on 30M chart
GBP/USD continued to trade with a slight downward bias, but the whole movement is still much more like a flat than a trend. The current nature of the movement is quite dangerous for beginners, since there seems to be a trend, but at the same time it is quite weak, and the price often rolls back up and enters a correction. Therefore, this movement is no better than a flat. There was no fundamental and macroeconomic backdrop on Wednesday. The British pound, unlike the euro, is now in a bearish correction, which we have been waiting for for more than three weeks. But now it is surprising that only the pound is falling. However, this also happens from time to time. We can only be content with what we have. Ahead of the Christmas and New Year holidays, there might be less logic in the movement than it was before.
GBP/USD on M5 chart
Four trading signals were generated on the 5-minute chart on Wednesday. At first, the pair crossed 1.2141 and managed to drop almost to 1.2079, but it didn't work out. Therefore, beginners had to use this signal with a short position, but you could only gain profit by closing the transaction manually. Then a buy signal was formed near 1.2141, which turned out to be absolutely false and led to a loss. You could also earn using the next signal (also had to be worked out, since the very first signal is not considered as false), since the price reached the target level of 1.2079. Thus, even without the first trade it was possible to get some dozens of points of profit, which is not bad taking into consideration the pair's movement in recent days. The last, fourth signal was formed too late and it should not be used.
Trading tips on Thursday:
GBP/USD continues a not too strong downward movement after the pound crossed the ascending trend line. Thus, at least some movement is still present, and you can earn a bit. Volatility is falling with the holidays approaching, but still remains quite good. On the 5-minute chart on Thursday, 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 and 1.2337-1.2343. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Thursday, GDP reports for the third quarter will be published in the UK and the US. These will be the third and last estimates of the quarter. Thus, we do not expect a strong reaction to this data.
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.
