Analyzing Wednesday's trades:
GBP/USD on 30M chart
The GBP/USD pair also showed a sharp downward movement on Wednesday, as it traded mostly lower in the second half of the day. The main item of the day was the US ADP report, which exceeded forecasts by twice as much. We do not consider this report important, but the market paid attention to it. The pound continued its downward movement and now it is falling for various reasons. However, it seems like the situation called for it. Therefore, we fully support the downward movement, even if the fundamental and macroeconomic backgrounds do not support it.
The Bank of England meeting is set for Thursday, and the current movements may already show what we should expect. Take note that the central bank's meeting is an important event, and the market always expects some decisions and statements from the central bank, trying to predict them. Thus, it is quite possible that the movements of the past few days are an anticipatory reaction to certain BoE decisions. We will find out if the market guessed these right decisions. All possible scenarios cannot be excluded, and the pair can exhibit any type of movement.
GBP/USD on 5M chart
There were two trading signals on the 5-minute chart. First, the pair settled below the level of 1.2748, then it rebounded from the level of 1.2688. In the first case, beginners had to open a short position, and in the second case, they had to close a short and open a long position. The profit from shorts amounted to 30 pips, and the profit from longs was also 30 pips. Thus, it was not possible to catch when the pair started to fall, but the day still ended with a significant profit.
Trading tips on Thursday:
On the 30-minute chart, the GBP/USD pair continues to trade lower. However, there will be many more fundamental and macroeconomic events this week, so the pair may swing from side to side. We support the extended downward movement, as we believe that the pound is significantly overbought and unreasonably expensive, but Thursday's movements could turn out to be anything. The key levels on the 5M chart are 1.2538, 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Thursday, the BoE will announce the results of its meeting. The US will release data on the ISM index and initial jobless claims. Naturally, the main item for the day will be the BoE's decision and its stance regarding its future course of actions.
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.
