Analyzing Wednesday's trades:
GBP/USD on 30M chart
GBP/USD was also slowly moving down on Wednesday in the absence of any fundamental and macroeconomic events. According to the last couple of days, it was possible to form an ascending trend line, but the only point is to overcome this trend line in order to determine a new round of the downtrend. I don't expect the pound to rise sharply, so I expect a breakthrough maybe by today or tomorrow. Thus, the pound will likely fall today, tomorrow and the day after tomorrow. Since the fundamental background is not getting stronger, there's no need to expect a sharp fall either. Please remember that the last upward spiral (on Tuesday) was triggered by the UK PMI, which was surprisingly strong. If we follow the general trend, the pound should continue to fall.
GBP/USD on M5 chart
Wednesday's trading signals were difficult to process as well. The first buy signal was formed on the rebound from the area of 1.2065-1.2079. After that the price went up about 30 points, which was enough to set the Stop Loss to Breakeven, which was used to close the long position, when the price returned to 1.2065-1.2079. The second sell signal was formed too late, so there was no point in pricing it. The volatility of the day was about 100 points, but the nature of the movement itself was far from ideal.
Trading tips on Thursday:
On the 30-minute chart, GBP/USD continues a sluggish downward movement, which is fully in line with our expectations. Bears continue to "rule the ball", but the pressure they exert on the pair is clearly weak. There are practically no news and reports, and the ones we have now are even less important. On the 5-minute chart, it is recommended to trade at the levels 1.1863-1.1877, 1.1950-1.1957-1.1961, 1.2065-1.2079, 1.2138, 1.2171-1.2179 and 1.2245-1.2260. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. There is nothing scheduled for Thursday in the UK, except for the speeches of two representatives of the Bank of England - Cunliffe and Mann. Theoretically they might have something important to say on rates and monetary policy. In the U.S., just the second-quarter GDP report and unemployment claims. Both of those are not important, not even the economic growth report.
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.
