Analyzing Monday's trades:
GBP/USD on 30M chart
The GBP/USD pair also traded lower on Monday and it even managed to show beginners what "swings" are. When "swings" form on higher charts, it is not always obvious that they are swings, because the movements are wide and can take a long time. In just a day, everything is extremely simple and understandable, no explanation is required. Nevertheless, by the end of the day, the British pound dropped below the week's opening price. However, there were no fundamental or macroeconomic reasons for this. On Monday, there was no important macroeconomic information coming from the UK or the US. Therefore, I believe that the pair will continue to fall for technical reasons. And since it is quite strong, I believe that this time a strong and prolonged (in terms of the 30-minute chart ) downtrend has started.
GBP/USD on 5M chart
The trading signals on the 5-minute chart were bad. Due to the classic "swings," almost all the signals formed around the same level of 1.2396. Naturally, most of them turned out to be false. Therefore, beginners should have been concerned with minimizing losses on Monday. Fortunately, it was quite simple to do so. The first trading signal was formed overnight, but by the time the European session opened, it could still be used since the price had not moved far from the formation point. The pair passed exactly 20 points in the right direction, which was enough to set the Stop Loss at breakeven. The next signal formed in the middle of the European session, but this time it did not fall by 20 points, so a small loss was incurred on the short position. Since the first two signals around 1.2396 were false, subsequent ones should not have been used. By the end of the day, the pair fell to 1.2360, but it was too late to act on that signal.
Trading tips on Tuesday:
On the 30-minute chart, GBP/USD started a bearish correction, which can end very quickly. The pound should have fallen a long time ago, and there are many more reasons for this scenario than for its further growth. However, the market may think otherwise. The 1.2343 level is the last local low, so overcoming it will increase the likelihood of forming a downtrend. On the 5-minute chart, it is recommended to trade at the levels 1.2171-1.2179, 1.2245-1.2260, 1.2343-1.2360, 1.2396, 1.2444, 1.2477, 1.2520, 1.2577-1.2597-1.2616. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Tuesday, the UK will release secondary reports on unemployment, jobless claims, and wages. The market will hardly react to such data. And in the US, the only event is a late-night speech by Michelle Bowman.
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.
