Analyzing Monday's trades:
GBP/USD on 30M chart
On Monday, GBP/USD also started a new round of correction and even managed to overcome the descending trend line, which had just been formed. Formally, the downtrend is now broken, but in fact, it may persist. I don't see any strong reason for the pound to rise, but it is necessary to admit that they can appear this week. At least two important inflation reports will be published (UK and US). Whatever they are, the market can interpret them in any way it wants. Therefore, the movements can be totally unpredictable. Hence, GBP might show some growth this week. As for Monday, there were no important events and reports. Traders had nothing to react to, but as you can see, the pair was in a trend for most of the day anyway. In the mid-term, I still expect the British currency to fall.
GBP/USD on 5M chart
There were several trading signals on the 5-minute chart. The first sell signal was formed near 1.2065 and caused the pair to fall by 20 pips, which was enough to set the Stop Loss to Breakeven, which was used to close the deal. Two buy signals near 1.2065-1.2079 followed, afterwards the price managed to rise to 1.2138, near which a sell signal appeared. At that moment, beginners could close the long position with a profit of about 30 pips. The sell signal near 1.2138 was formed too late, so it was not necessary to work it out. The profit on Monday was small, but it is better than nothing.
Trading tips on Tuesday:
On the 30-minute chart, GBP/USD may enter a bullish correction since the pair crossed the trend line, and it has been unable to return to 1.1961. Nevertheless, I don't think it has stopped falling. Judging by this week's macroeconomic background, the dollar will have more chances to grow, which means that the pair could fall again. On the 5-minute chart, it is recommended to trade at the levels 1.1950-1.1957-1.1961, 1.2065-1.2079, 1.2138, 1.2171-1.2179, 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. UK unemployment and payrolls reports will be released on Tuesday. Not the most important data under current circumstances. But the US inflation report for January will also be published, which might be considered as the most important report of the week. I think there might be a strong market reaction to it as it is directly related to the Federal Reserve's monetary policy.
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.
