Analysis of Friday's Trades
1H Chart of GBP/USD
On Friday, the GBP/USD pair continued its downward movement, which began on Thursday. Notably, there were no strong fundamental reasons for the British currency to decline on Thursday, but the price broke below the ascending trendline, leading to a drop based purely on technical factors. By Friday, the price approached the 1.2613 level, where its last local low is located. It is not yet certain that the downtrend, which started three months ago, has resumed. Over the next five days, numerous UK and U.S. events could trigger unexpected price movements. Therefore, while we expect a decline in the British currency in the medium term, macroeconomic and fundamental factors could also drive the pound upward.
5M Chart of GBP/USD
In the 5-minute timeframe, Friday presented one excellent sell signal. Unfortunately, it formed overnight, but as we know, trading takes place around the clock. At the start of the European trading session, the price had not moved significantly away from the signal point, so short positions could still be opened. During the day, the price initially approached the 1.2613 target level and eventually worked through it. Thus, traders could secure profits regardless of when the trade was closed.
Trading Strategy for Monday:
The GBP/USD pair presumably completed its upward correction on the hourly timeframe. In the medium term, we fully support the pound's decline, as we believe this is the most logical scenario. Therefore, further depreciation of the British currency can be expected in the near future. However, this week, it will be crucial to monitor fundamental and macroeconomic factors closely.
On Monday, novice traders can trade based on the 1.2613 level. A new rebound from this level could lead to another upward movement. Conversely, consolidation below this level would confirm the resumption of the downtrend.
On the 5-minute timeframe, key levels to trade from are 1.2387, 1.2445, 1.2502–1.2508, 1.2547, 1.2633, 1.2680–1.2685, 1.2723, 1.2791–1.2798, 1.2848–1.2860, 1.2913, 1.2980–1.2993. On Monday, reports on business activity will be published in the UK and the U.S. The British reports hold more significance for the market, but as always, the key will be deviations from forecasts.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 20 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
