Analyzing Tuesday's trades:
GBP/USD on 30M chart
The British pound rallied significantly during the trading session on Tuesday. Everything that was mentioned in the article about EUR/USD is valid for the British pound as well. The US inflation data boosted the pound, and no one could have predicted such a turn of events, even if they knew the actual value for October in advance. The whole point is that the inflation value coincided with the forecast. Core inflation decreased by only 0.1%, also nearly matching the forecast. Therefore, it is very difficult to say why the dollar fell by 200 pips in just a few hours. It is clear that this is how the market reacted, but we don't know the reason behind it.
Now the corrective trend has resumed, but we still expect it to end. The US economy, despite talks of a recession, is still much stronger than the UK, and the Federal Reserve rate is also higher than the Bank of England's rate. We believe that the downward movement has not yet ended, but of course, short positions should not be opened without corresponding signals.
GBP/USD on 5M chart
On the 5-minute chart, quite a number of trading signals were generated, and beginners were lucky in this situation. The first sell signal was formed at the beginning of the European trading session when the price bounced off the level of 1.2270. That was when traders should have opened a long position. Once the US inflation data was released, you could simply set a stop loss to breakeven in order to protect yourself. As a result, the pair reached the 1.2457-1.2488 range, where long positions should have been closed. The profit was 200 pips.
Trading tips on Wednesday:
On the 30-minute chart, the GBP/USD pair sharply and unexpectedly resumed its upward movement. But we still believe that it will end soon. Initially, we expected a more pronounced correction, and in the last week, the downtrend resumed. But in both cases, US data interfered, and we also have the market's inadequate reaction to the reports. The key levels on the 5M chart are 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, 1.2748. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Wednesday, the UK will publish its inflation report, and we sincerely hope that there will be no such flurry of movements as Tuesday. In the US, only secondary reports on retail sales and producer prices will be released.
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.
