Analyzing Tuesday's trades:
GBP/USD on 30M chart
The GBP/USD pair failed to breach the 1.2801 level and started a sort of bullish correction. In principle, we agree with the possibility of a small upward correction since the pair cannot keep moving constantly in the same direction. The main thing is that it stays as a correction and not a new uptrend. There were no significant reports in both the UK and the US, so the movements were not related to macroeconomics or fundamentals. At the same time, the euro also fell. Perhaps the market is already preparing for the central bank meetings. Since the Bank of England's interest rate is higher, the pound still performs better than the euro. However, both currency pairs remain overbought, and the dollar is trading undeservedly low. Nevertheless, the pair has yet to reach the 1.2801 level, and the descending trendline has been broken, which means that the pound may edge up.
GBP/USD on 5M chart
There were several trading signals on the 5-minute chart, but they were not the best ones. Initially, the pair bounced off the 1.2848-1.2860 area, but it couldn't reach the target level of 1.2801. This turned out to be a false signal, but you could set the Stop Loss at breakeven. Another rebound followed from that area, but after the sell signal, the pair could not fall by even 20 pips. After that, a buy signal was formed, which brought 10 pips of profit, as the upward movement ended very quickly. As a result, the day ended with a minimal loss or no profit.
Trading tips on Wednesday:
On the 30-minute chart, the GBP/USD pair extends its downward movement. We believe that the downtrend should take place in the medium term, but a bullish correction is also possible. The pound is still heavily overbought and has no grounds to start a new wave of growth. Nevertheless, the Federal Reserve meeting will take place on Wednesday, and the market reaction can be unpredictable. 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. No significant reports or events lined up in the UK. Take note of the Fed meeting in the evening, followed by a press conference with Fed Chair Jerome Powell. We should brace ourselves for the main movements at this time.
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.
