Analyzing Thursday's trades:
GBP/USD on 30M chart
On Thursday, GBP/USD followed EUR/USD lower due to external factors. Strictly speaking, the European Central Bank meeting and ECB President Christine Lagarde's speech had no direct relation to the pound. However, the euro and the pound often correlate with each other, so the pound's decline does not come as a surprise. Moreover, the pair was extremely overbought. And after rising for so long and quite sharply at that, it was inevitable for the pound to show a significant downward correction at the very least. Therefore, the pound's decline on Thursday was quite reasonable.
Furthermore, take note that the US GDP in the second quarter grew by 2.4% compared to forecasts of 1.8%, and the volume of orders for durable goods increased by almost 5% in June, surpassing the 1% forecast. As we can see, the market had enough reasons to buy the dollar, and it is reassuring that this time, it did not overlook the data that clearly supported the US currency.
GBP/USD on 5M chart
There were good signals on the 5-minute chart, and the volatility exceeded 200 pips. It was quite convenient to trade with such movements. The first sell signal was formed before results of the ECB meeting were announced, so beginners could enter the market with a short position and move their Stop Loss to breakeven closer to the US trading session and calmly enjoy Lagarde's speech. Later on, the pair broke through the level of 1.2913, the area of 1.2848-1.2860, and dropped to the level of 1.2801. Consequently, only one trade should have been opened, and it should have been manually closed in the evening. The profit amounted to at least 150 pips.
Trading tips on Friday:
On the 30-minute chart, the GBP/USD pair completed an upward correction, and now the main focus is to continue the downward movement. Next week, the Bank of England may theoretically start hinting at the imminent end of the tightening cycle, as its interest rate is already at 5.25%. Therefore, the pound may finally start losing market support, as we anticipate. The key levels on the 5M chart are 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043, 1.3107. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Friday, there are no important events lined up in the UK. The US will release reports on personal spending and income of Americans, as well as the Personal Consumption Expenditures Price Index and the University of Michigan Consumer Sentiment Index.
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.
