Analyzing Tuesday's trades:
GBP/USD on 30M chart
On Tuesday, the GBP/USD pair showed lower volatility compared to the EUR/USD pair, which is quite strange. However, upon closer examination, everything becomes clear and logical. European Central Bank President Christine Lagarde's morning speech, which can be considered hawkish, was directly related to the EUR/USD pair and had no impact on the GBP/USD pair. Therefore, it's not surprising that the euro was traded more actively. As for the economic backdrop related to the pound, there were only three reports from the US, which were completely ignored. Perhaps there was a 20-point reaction, but who cares about a 20-point movement?
The number of building permits increased more than expected. Durable goods orders volumes exceeded forecasts. New home sales were higher than market expectations. Although all these reports can be considered secondary, we could have expected a reaction to them as all three turned out in favor of the dollar. However, the British pound didn't really rise or fall. Although the uptrend persists, despite surpassing the ascending trend line.
GBP/USD on 5M chart
Speaking of trading signals, the situation on the 5-minute chart was excellent because there were none. It is considered "excellent" because volatility was only 55 pips, and the pair reversed and changed direction several times during the day, which could potentially lead to false signals if any level was encountered along the price path.
Trading tips on Wednesday:
As seen on the 30M chart, the pair has been moving downward for eight consecutive trading days. During those days, it covered a distance of 160 pips. This is all you need to know about the pound's desire to correct. We still believe that the pound is heavily overbought, but the market is not ready to stop buying yet. The pound has not breached the 1.2690 level and this has held the pair from falling further. The key levels on the 5M chart are 1.2457, 1.2499, 1.2538, 1.2597, 1.2629, 1.2690, 1.2801, 1.2860, 1.2913, 1.2981. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Wednesday, there will be a speech by Bank of England Chief Economist Huw Pill, as well as Federal Reserve Chairman Jerome Powell. We can expect interesting statements and comments from these officials, but they probably won't share any new information. Therefore, these speeches may not stir some market reaction.
Basic trading rules:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.
6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines are channels or trend lines that display the current trend and show which direction is better to trade.
MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.
Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.
