Analyzing Friday's trades:
GBP/USD on 1H chart
The GBP/USD pair showed volatility of 40 pips on Friday. In general, we could have already ended the article with this statement... If the EUR/USD pair stood still all day, then the GBP/USD pair was in a coma. And while there were no interesting events in the European Union, the UK released reports on GDP and industrial production, which could have triggered market movements. But no. We didn't see anything like that. If there was any market reaction, it was barely noticeable. However, we have already said that volatility has been very low in recent months. It takes a lot of effort to make profit in such a market. Also, take note that the pound had no grounds to rise on Thursday, but it finally had good reasons on Friday, and yet it chose to stay still.
GBP/USD on 5M chart
The 5-minute timeframe showed that the pair was basically flat. At the beginning of the European session, the pound rose by a whopping 18 pips on GDP and industrial production reports. And that was it for a market reaction... Novice traders could enter the market using two trading signals. First, the pair bounced off the level of 1.2541, and then - off the level of 1.2502. Trading between these levels could even result in a profit of about 30 pips.
Trading tips on Monday:
On the hourly chart, the GBP/USD pair has excellent prospects for forming a downward trend, but the correction persists. The fundamental backdrop continues to support the dollar much more than the British pound. Therefore, we only expect downward movement from the pair. The Bank of England showed a firm dovish stance, while the Federal Reserve has taken the most hawkish position possible.
If we are talking about logical movements, then we expect the pound to fall on Monday. Bounces from levels and consolidation below the levels should be interpreted as sell signals.
The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457, 1.2502, 1.2541-1.2547, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791. Today, there are no important or even mildly interesting events planned in the US and the UK. We will probably see "breathtaking" movements of 30-40 pips...
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.
