Analyzing Friday's trades:
GBP/USD on 30M chart
GBP/USD was also trading lower on Friday. And this despite the fact that the European inflation report had absolutely nothing to do with the British currency. But either the euro pulled the pound down again, or sterling was so overbought that there was no other way, or the fact of reaching the upper limit of the horizontal channel on the 24-hour view favored the downward reversal. As a result, the price overcame another uptrend line, which changes the current trend to a downtrend. We can only hope that this time the downward movement will be stronger than 100 pips, after which the uptrend will be restored. The UK Q4 GDP report came out on Friday, and traders did not react to it. The British economy grew 0.1%, so technically it has not yet entered recession. In America, there were some minor reports which, if they provoked a reaction, were very weak. So now we expect the pound to fall. By 500 points at least.
GBP/USD on 5M chart
The trading signals on the 5-minute chart weren't good. During the day, the pair regularly changed its direction, and volatility was not very high again. The pair spent most of the day between 1.2387 and 1.2342, trading between these levels. By the end of the day, the 1.2387 level was removed and 1.2396 was added. Therefore, beginners could gain dozens of points between those levels, and there were no other movements during the day. In general, the situation was strange: volatility was 100 points, but if you cut off the Asian trading session and the end of the US one (when deals shouldn't be opened), volatility is only 57 points. And the nature of the movement is actually flat.
Trading tips on Monday:
On the 30-minute chart, GBP/USD continues to trade in a classic "swing" mode, but in the long term. I expect a bearish correction after several weeks of growth, and at the moment, there are quite tangible reasons to expect a decline - the price crossed the trend line. On the 5-minute chart, it is recommended to trade at the levels 1.2065-1.2079, 1.2143, 1.2171-1.2179, 1.2245-1.2260, 1.2343-1.2360, 1.2396, 1.2444-1.2471, 1.2577-1.2616. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Monday, manufacturing reports for the UK and US will be released. Traders could react to both reports, but the US ISM report is more important. All in all, it could be another day of low volatility and very bad movements.
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.
