Analyzing Thursday's trades:
GBP/USD on 30M chart
GBP/USD also continued to correct on Thursday and showed a more interesting and stronger movement than the day before. The pair continues to move towards the downtrend line, which is quite formal because the price broke through it at least twice. Thus, the downtrend persists for the time being. The fundamental and macroeconomic backgrounds were present on Wednesday, but there was no market reaction. On Thursday, they were absent, but the market traded more actively. We don't know what will happen on Friday, but the Nonfarm and U.S. unemployment reports are the key events this week. We are not sure if they will support the USD. A strong U.S. economy does not mean that every report should be stronger than expected. But overall, we think the dollar should continue to rise in the medium term. Especially, since this week it got a very concrete reason for that - Federal Reserve Chairman Jerome Powell's hawkish rhetoric. Now the market is not just assuming a 0.5% rate hike in March, this is one of the working options with at least a 50% probability.
GBP/USD on 5M chart
Thursday's trading signals were not the best, but the movement itself left much to be desired. The first sell signal - a rebound from 1.1863 - turned out to be false. The pair did not manage to go down even 20 pips. The next buy signal, breaking through the area of 1.1863-1.1877, was better. The price reached the nearest target level of 1.1924 and stayed around it till the end of the day. Therefore, beginners could open only two positions on Thursday. The first one was unprofitable, while the second one was profitable. In total, you could gain about 0 points of profit/loss.
Trading tips on Friday:
On the 30-minute chart, GBP/USD finally broke out of the horizontal channel, so now the downtrend can be fully revived, which we have been expecting for several weeks. This week, only the Nonfarm and US unemployment reports remain, which should provoke a strong reaction. We certainly expect the pair to fall again, but the US reports might be weaker than we expected. On the 5-minute chart, it is recommended to trade at the levels 1.1608, 1.1648, 1.1716, 1.1793, 1.1863-1.1877, 1.1924, 1.1992-1.2008, 1.2065-1.2079 and 1.2143. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. GDP and industrial production for January are scheduled for Friday in the UK. In the US, as mentioned, NonFarm Payrolls and unemployment reports are scheduled for release. The market could have a strong 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.
