Analyzing Monday's trades:
GBP/USD on 1H chart
GBP/USD also exhibited ultra-low volatility on Monday. The pair is trading within a descending channel, so we can expect the pound to fall further. On Monday, there was no significant fundamental or macroeconomic background in the United States and the United Kingdom. There was nothing to react to. Nevertheless, this week, there are at least three events that could trigger relatively strong movements. Market participants may look to the release of the UK inflation report on Wednesday morning. This first event is quite interesting as it may affect the Bank of England's stance on Thursday. We believe that under any circumstances, the British currency should decline, while the dollar should rise. We can only hope that the market will trade the pair in line with the fundamental background, rather than the other way around.
GBP/USD on 5M chart
Two trading signals were generated on the 5-minute timeframe, and technically, these trades could have been executed. However, with the overall volatility at just 30 pips, what kind of profit could one expect? The price bounced off the level of 1.2725 twice, and in both cases the pair only rose by 10 pips. That was the extent of the pair's movements for the day.
Trading tips on Tuesday:
On the hourly chart, GBP/USD has finally started to move downward. Since the pound doesn't have any logical reason to rise further, we encourage the British currency's decline. However, it is extremely difficult to confirm whether the market has turned firmly bearish. The pound is still unreasonably too high at the moment, and it has been that way for too long. The bullish bias remains intact in the medium term.
The key levels on the 5M chart are 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. On Tuesday, there are no significant events lined up in the UK. The US will only release data on building permits and housing starts, and these have extremely low chances of influencing market sentiment. Nevertheless, volatility may gradually increase in anticipation of two key central bank meetings and the UK inflation report.
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.
