Analysis of previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair continued its upward movement on Thursday after leaving the horizontal channel. The quotes of the British currency were around the level of 1.3435 by the end of the day. A new upward trend line has been formed, therefore, there is a trend for the pair at the moment, therefore, rebounds from the trend line can be used as buy signals. Also, bull trading is now generally more preferable. Volatility was not weak today. Several macroeconomic reports were even published during the day. All in the US. None of these have provoked a strong market reaction, but we still note that the number of orders for durable goods - the most important report today - rose by 2.5% in November, instead of the projected growth of 1.9%. However, statistics for December will be more important, since it was in December that the whole world faced another strain of "coronavirus" and another wave of a pandemic.
5M chart of the GBP/USD pair
On the 5-minute timeframe, the movement of the pound/dollar pair was very ambiguous on Thursday, in contrast to the previous days. At first everything was good, as the pair was showing a trend movement. But the situation changed in the US trading session. The pair began to "jump" around the levels 1.3407 and 1.3416, which are no longer relevant at the end of the day, having generated many false signals. However, first things first. The first buy signal was formed near the 1.3366 level. It should have been worked out, since its accuracy was beyond any doubt. The pair subsequently rose above the 1.3407-1.3416 area, but the 1.3435 level is the day's high, so it did not take part in the trades. Therefore, the long position should have been closed when the pair dipped back below the 1.3407 level. However, Take Profit in the amount of 40-50 points could have worked as well. This is exactly how much the pair went up after the signal was formed. The next sell signal could also be worked out, but it turned out to be false, the price could not go down by 20 points. However, the short position should have been left before consolidating above 1.3416, since the US consumer sentiment index was published (second tick) at the same time and there was no need to risk it. As a result, the loss is up to 10 points. The next buy signal should not have been worked out as the price sharply soared. It was dangerous. All subsequent signals near the 1.3407-1.3416 area should be ignored, since by that time two false signals had already been formed around it.
How to trade on Friday:
At this time, the upward movement continues on the 30-minute timeframe. There is a trend, therefore, before the price settles below the trend line, preference should be given to long positions. The important levels on the 5-minute timeframe are 1.3342, 1.3366, 1.3435, 1.3470. We recommend trading on them on Friday. The price can bounce from them or show breakthroughs. As before, we set Take Profit at a distance of 40-50 points. At the 5M TF, you can use all the nearest levels as targets, but then you need to take profit, taking into account the strength of the movement. When passing 20 points in the right direction, we recommend setting Stop Loss to breakeven. No interesting report in the UK and America on December 24. And in general, this day will be a half-day because of the celebration of Christmas on Saturday.
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 US 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 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.