Analyzing Thursday's trades:
GBP/USD on 30M chart
On Thursday, GBP/USD showed a more interesting, and most importantly, a downward movement. While the euro remained mostly stagnant throughout the day, the pound resumed its decline, as we have warned before. We expect the dollar to rise and the pound to fall, as the bullish correction that has been developing in the last month may have finally come to an end. Therefore, in the near future, we expect the pair to fall to the previous week's lows, located near the level of 1.2107.
As for the fundamentals and macroeconomics, the only interesting event was Federal Reserve Jerome Powell's speech. He said that the key rate may rise again if the situation requires it. He also noted that the 2% inflation target remains unchanged, but the central bank is currently taking a more cautious position, trying to find a balance between overly tight and overly loose monetary policy. His words can be interpreted as "moderately hawkish," which could contribute to the US dollar's strength in the second half of the day.
GBP/USD on 5M chart
On the 5-minute chart, many trading signals were generated. The pair showed volatility of almost 100 pips, but throughout the day, it repeatedly changed direction, working through all available levels from all sides. Therefore, although we saw a good amount of movement, it is not necessarily good for traders. The first two signals brought profit to beginners, but just a small profit of about 20 pips. Then there were two false signals near the level of 1.2270, but you couldn't even set a stop loss to breakeven. All subsequent signals, considering the nature of the pair's movement, should not have been executed.
Trading tips on Friday:
On the 30-minute chart, we had been anticipating a proper upward correction cycle for the GBP/USD pair for quite some time, and it has finally materialized. However, at this point, it seems that this correction is already coming to an end. If that's the case, we expect the downtrend to resume. The pair has breached the 1.2270 mark, so the downtrend will likely follow. 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, 1.2310, 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 Friday, several reports will be released in the UK. We can highlight the quarterly GDP and industrial production in September. It's not certain that the market will find these reports interesting, but it's still something. In the US, we can look to the consumer sentiment index.
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, after 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 trendline 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.
