Analyzing Wednesday's trades:
GBP/USD on 30M chart
GBP/USD continued its upward movement on Wednesday. This time there were reasons for the pound's growth. But I also have to remind you that the pound (as well as the euro) was not always rising in the recent months, even if it had reasons to do so. A correction did not start even if the pair crossed the ascending trend line, we rebuilt the line itself. Unfortunately, the market is now set up to buy, so strong sell signals turn out to be false. However, we are still trading on the levels on the lower chart, so it does not matter. The British inflation report came out in line with the forecasts - 10.5%. This is a very weak slowdown, which according to the logic of market participants, should provoke a stronger and longer increase in the Bank of England's rate. The pound traded higher due to this belief. Also, we got some disappointing news from America, where retail sales fell more than projections while industrial production increased less than expected. This data also helped the pound to rise.
GBP/USD on M5 chart
Almost all of the trading signals, except for one, were nearly perfect. Although there was no miracle since the pair only moved in one direction for almost the entire day. During the night there was a buy signal near 1.2260, and by the opening of the European trading session the price moved away from the point of formation only by 9 pips. Therefore, it was safe to open a long position. Further, the price crossed the 1.2337-1.2343 area and was near 1.2371 (this wasn't relevant at the end of the day), then it stopped and formed the first sell signal. Long positions should have been closed here with a profit of about 80 pips. The sell signal turned out to be false and traders lost around 28 pips. However, after climbing above 1.2371 it was possible to open longs again until the evening, the price did not generate any more signals. The trade should have been closed manually. The profit was about 20 pips more. Therefore, beginners could gain at least 70 pips, following our advice.
Trading tips on Thursday:
GBP/USD continues to move up, so we have an uptrend and an ascending trend line again. The dollar may fall even lower this week, if the comments of the Fed representatives will be overtly "dovish". On the 5-minute chart, it is recommended to trade at the levels 1.2109, 1.2171-1.2179, 1.2245-1.2260, 1.2337-1.2343, 1.2387, 1.2444-1.2471, 1.2577-1.2597. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. There are no interesting events scheduled for Thursday in the UK, but there will be several speeches of the Fed members in the US, which may provoke a market reaction.
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.
