Analysis of previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair continued its downward movement on the first trading day of the new week. The pair fell by 130 points during the day, which is a lot, given the weak macroeconomic background, which also practically did not contribute to the fall of the pound/dollar pair. We are talking now about the indices of business activity in the manufacturing and services sectors of the UK, which were released this morning. It may seem that the pound’s fall was provoked by these reports, but in fact it is not so. They could have had a certain impact, but it was hardly possible to expect a drop of 130 points just because the business activity indices only slightly decreased in relation to December. Thus, we tend to believe that the fall was not related to macroeconomic statistics. Rather, it was due to the general bearish mood of the market and the general fundamental background, which continues to speak in favor of the US dollar. A new downward trend line was formed on the 30-minute TF, which supports downtrend trading.
5M chart of the GBP/USD pair
On the 5-minute timeframe, the movement of the pound/dollar pair was one-sided for most of the day, which is very good. The price quite accurately overcame all the levels that came in its way today. First, the pair overcame the area of 1.3521-1.3531, where novice traders could open short positions. Then it crossed the level of 1.3488, and later the level of 1.3465. It was only when the price settled above this level (especially given the weakness of macroeconomic statistics in America, which led to the price rebound upward) that it was possible to close short positions. It was possible to earn about 40-50 points on them. It was not necessary to open new deals near the level of 1.3465 (especially for buying), since although the statistics were worse than forecasts in America, in itself it was not too significant. Therefore, it was clearly not necessary to count on serious growth after such a strong fall almost out of the blue. It was possible to try to work out a new sell signal when the price settled below the level of 1.3465 once again, and it was possible to earn another dozen points of profit on it.
How to trade on Tuesday:
On the 30-minute TF, the price left the descending channel very quickly, but the downward trend persists and a new downward trend line has already been formed. The pound has few grounds for growth now, but this week there will be several very important events in the US that can lead to a rise in the dollar. For example, the Federal Reserve meeting on Wednesday. Although the US currency now does not need a reason to get more expensive. On the 5-minute TF tomorrow, it is recommended to trade by levels 1.3366, 1.3414, 1.3439, 1.3488, 1.3521-1.3531, 1.3572. There won’t be a single important publication or other event in the UK tomorrow. Novice traders can only pay attention to the indicator of consumer confidence in the United States in the afternoon.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the American one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company – www.instaforex.com