Analyzing Friday's trades:
GBP/USD on 30M chart
The GBP/USD pair was losing ground on Friday, but with relatively small movements. The downward movement is slowing down, and it may even come to a halt, as the market's reaction to the Federal Reserve's meeting results cannot be predicted. The descending trendline is somewhat formal, and the price can break through it at any moment. The UK released its retail sales report on Friday, which played in favor of the British currency. The pound edged up in the morning, but it quickly stopped, making it difficult to determine if the market had fully reacted to the report.
Overall, the expectation is that this downtrend will continue, regardless of any fundamental background. However, the market may have a different view. A sharp fall has been overdue for a long time, but it is still difficult to determine if the market has finished its cycle of unjustified purchases or if it's just another minor retracement. The 24-hour chart provides a clearer view of what we are discussing.
GBP/USD on 5M chart
Speaking of trading signals on the 5M chart, the pair encountered the 1.2848-1.2860 area, and hovered around it all day. The first sell signal was formed almost at the opening of the US session. After that, the price fell by about 20 pips, allowing a Stop Loss to be set at breakeven. However, even entering this signal in time and not when the price was already halfway to the 1.2801 level was quite challenging. Later, the pair returned to the mentioned area and traded around it until the end of the day, without forming any other clear signals.
Trading tips on Monday:
On the 30-minute chart, the GBP/USD pair finally extends its sharp decline. We believe that the pound should continue its downward movement. It may not be immediate and could possibly pause at some instances. Regardless, the downtrend should take place. The pound is still heavily overbought and has no grounds for further growth. The key levels on the 5M chart are 1.2653, 1.2688, 1.2748, 1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043, 1.3107, 1.3145. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Monday, the UK and the US will release their manufacturing and services PMIs. While these reports are not considered super important, significant deviations from the forecasted values may cause market reactions.
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.
