Analyzing Monday's trades:
GBP/USD on 30M chart
GBP/USD traded higher at the end of Monday. However, unlike the euro, the pound started to rise during the US trading session and continues to advance. Obviously, this was not a reaction to any events because there were no significant events on Monday. Moreover, reactions to events or reports usually last 1-3 hours, but not 5-6 hours. So, we can conclude that after the recent rebounds from the 1.2107 level, the second leg of the upward correction we discussed throughout the previous week has finally started. Now we expect the pair to reach the area around the 1.2325 level. However, the pound will likely trade higher. Since this is for technical purposes, it doesn't require fundamental or macroeconomic support.
GBP/USD on 5M chart
The pair formed several trading signals on the 5-minute chart, but none of them were great. Beginners were fortunate that after the first two false sell signals, the pair did not fall by 20 pips. This made it possible for them to close a losing position with a 40-pip loss, and also open a long position based on the buy signal in the same area. This signal brought the same 40 pips, so the day ended with no significant results. Nevertheless, the pound's movements were quite erratic and unstable, so it was a good thing that the day ended without losses.
Trading tips on Tuesday:
On the 30-minute chart, we expected a new leg of the upward correction, and it began on Monday. We warned you that the pair might rebound from the 1.2107 level, and that's exactly what happened. Now we need to wait for the price to reach the 1.2325 level, afterwards the correction may end at any moment. The key levels on the 5M chart are 1.1992-1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2179, 1.2235, 1.2270, 1.2372-1.2394, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2653, 1.2688. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Tuesday, Services and Manufacturing PMIs will be released in the UK and the US. These are not the most important indicators for the US since it has a more influential report in the form of the ISM PMI. However, British data can impact the pair's movement. In addition, the UK will release unemployment figures and jobless claims.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
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 represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
