Analyzing Friday's trades:
GBP/USD on 30M chart
On Friday, GBP/USD traded weakly and somewhat erratically but ended up depreciating, instead of edging up like the euro. This is somewhat strange because the fundamental and macroeconomic background was practically the same—neutral. The descending trendline remains relevant, but it is too far from the price for us to take it seriously. Take note that the downtrend persists, but that doesn't mean that the pound should fall by 100 pips every day. Volatility is not at its peak, and this should be taken into account when entering the market.
We expect the pound to extend its downward movement, regardless of the decisions made by the Federal Reserve and the Bank of England. The pound could still rise, but it will be a corrective move, and afterwards it will resume its downward movement.
GBP/USD on 5M chart
On Friday, the pair spent most of its time trading within the 1.2457-1.2488 range. Since the distance between these levels is 31 pips, it was better not to trade within them. It didn't make much sense because the potential profit was low, especially in the absence of significant events that could have triggered strong moves in either direction.
It was also not advisable to execute the signals for leaving that range. If we execute buy signals around the level of 1.2488, the stop-loss for the trades should have been set below the level of 1.2457. Since volatility was low, there were no guarantees that the price would move in the right direction by even 20-30 pips. In this case, the potential loss would have been greater than the potential profit.
Trading tips on Monday:
On the 30-minute chart, GBP/USD continues its descent almost daily. While movements are currently quite erratic, the downtrend remains notably consistent. For now, there are no visible indicators of this short-term bearish trend concluding. The key levels on the 5M chart are 1.2307, 1.2372, 1.2457, 1.2488, 1.2544, 1.2605-1.2620, 1.2653, 1.2688, 1.2748, 1.2787-1.2791. 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 and the US. Most likely, we should brace ourselves for another low-volatility day, and it will be quite challenging to trade under such conditions.
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.
