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FX.co ★ How to Trade the GBP/USD Pair on October 7? Simple Tips and Trade Analysis for Beginners

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Forex Analysis:::2024-10-07T03:55:25

How to Trade the GBP/USD Pair on October 7? Simple Tips and Trade Analysis for Beginners

Analysis of Friday's Trades:

1H Chart of the GBP/USD Pair

How to Trade the GBP/USD Pair on October 7? Simple Tips and Trade Analysis for Beginners

The GBP/USD pair also exhibited a significant decline on Friday, triggered by single-digit reports on Nonfarms and US unemployment. The GBP remained unchanged throughout the day, as it rose before and after the macroeconomic data from the US. It seemed that the market had exhausted its desire to sell the pound. We have mentioned several times that the British currency shows much higher resistance to declines against the dollar than the euro. Therefore, we may see a correction on Monday or Tuesday. After that, everything will depend on the market itself. If baseless buying of the pound and selling of the dollar resume, nothing can be done about it—accept it. We believe there are no grounds for the continuation of an upward trend. However, big players may continue to push the pair higher, as they are not obliged to follow fundamental and macroeconomic backgrounds and trade according to them.

5M Chart of the GBP/USD Pair

How to Trade the GBP/USD Pair on October 7? Simple Tips and Trade Analysis for Beginners

Two sell signals were formed in the 5-minute time frame on Friday, but it was again challenging to act on them. The price returned to 1.3145-1.3167 during the European trading session, but it plummeted by 65 pips in 5 minutes at the beginning of the US session. Thus, it was almost impossible to enter a trade. Subsequently, the area of 1.3102-1.3107 was breached, but by then, the downward momentum might have been nearing its end. A sell trade based on this signal could not have been unprofitable, but it was also unlikely to generate a profit. The market indicates that selling the pound is on hold.

How to Trade on Monday:

The GBP/USD pair has broken the upward trend in the hourly time frame. There are currently no issues with volatility, so within each day, traders can open trades instead of just watching the meager movements that could be described as "convulsions." The US currency has begun its long-awaited rise, but one should be cautious with selling, as Friday showed a lack of solid desire in the market to sell the pound.

On Monday, the British pound may start an upward correction, focusing on 1.3102-1.3107, above which the price stabilized on Friday. The macroeconomic backdrop will not hinder the pound's correction.

In the 5-minute timeframe, one can trade at the levels of 1.2913, 1.2980-1.2993, 1.3043, 1.3102-1.3107, 1.3145-1.3167, 1.3225, 1.3272, 1.3365, 1.3428-1.3440, 1.3488, and 1.3537. No significant events are scheduled on Monday in the UK and the US, so we will likely observe a sluggish upward correction.

Basic Rules of the Trading System:

  1. The strength of a signal is determined by the time it takes to form (bounce or break through a level). The less time it takes, the stronger the signal.
  2. If two or more trades were opened near a particular level based on false signals, all subsequent signals from that level should be ignored.
  3. In a flat market, any pair can generate a lot of false signals or none at all. In any case, it's best to stop trading at the first signs of a flat market.
  4. Trades should be opened during the period between the start of the European session and the middle of the US session, after which all trades should be manually closed.
  5. In the hourly time frame, it's preferable to trade based on MACD signals only when there is good volatility and a trend confirmed by a trendline or trend channel.
  6. If two levels are very close to each other (between 5 and 20 pips), they should be treated as a support or resistance zone.
  7. When moving 20 pips in the intended direction, a Stop Loss should be set to breakeven.

What's on the Charts:

Support and Resistance Price Levels: These levels serve as targets when opening buy or sell positions. They can also be used as points to set Take Profit levels.

Red Lines: These represent channels or trend lines that display the current trend and indicate the preferred trading direction.

MACD Indicator (14,22,3): The histogram and signal line serve as an auxiliary indicator that can also be used as a source of trading signals.

Important Speeches and Reports (always found in the news calendar) can significantly impact the movement of a currency pair. Therefore, trading should be done with maximum caution during their release, or you may choose to exit the market to avoid a sharp price reversal against the preceding movement.

For Beginners Trading on the Forex Market: It's essential to remember that not every trade will be profitable. Developing a clear strategy and practicing money management is key to achieving long-term success in trading.

Analyst InstaForex
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