Analyzing Thursday's trades:
GBP/USD on 30M chart
GBP/USD edged higher on Thursday. However, it is quite challenging to explain this specific movement. First, it's worth noting that volatility was low, even though there were plenty of important events during the day. The results of the European Central Bank meeting were as uneventful as possible, so it's difficult to say why the pound rose afterwards. Even more perplexing is why the market disregarded the strong reports regarding US GDP and durable goods orders. In terms of all parameters, the pair should have continued to fall on Thursday, but we've already warned you that the market's reaction could be completely unpredictable. And that was the kind of illogical reaction we witnessed on Thursday.
At this point, we cannot draw conclusions that the pound has resumed its downtrend, nor can we conclude that it has embarked on a new bullish correction. There's no trend line or channel, and this week's movements have been quite illogical, starting with the baseless rise on Monday and ending with the baseless fall on Tuesday and the passivity of movements on Thursday.
GBP/USD on 5M chart
On the 5-minute chart, several trading signals were generated. However, it's worth questioning whether it was even worth attempting to execute them. While the signals from the European session could have been cautiously traded (though unsuccessfully), the buy signal from the US session should have been completely ignored. The same goes for all the succeeding signals. As for the sell signals in the morning, it was better to leave the corresponding trade manually before the ECB meeting results were announced. In this case, losses could have been avoided.
Trading tips on Friday:
On the 30-minute chart, we were expecting a new leg of the upward correction, but it ended too soon. Of course, the pair can resume the downtrend right now, but it still seems incomplete. The 1.2107 level may keep the pair from falling for the fifth time in the last five days and trigger a new upward move, but the decline itself quickly ended due to the market's illogical response to Thursday's events. 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. There are no significant events lined up in the UK. From the US, traders may look to the release of reports on personal income and spending, personal consumption expenditure, and the University of Michigan consumer sentiment.
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.
