Analyzing trades on Monday:
GBP/USD on 30M chart
On Monday, GBP/USD was moving within a narrow sideways channel between 1.2980 and 1.3049, which makes up a range of about 70 pips. However, unlike the euro/dollar pair, the pound/dollar pair had a macroeconomic background today. Although it was not as strong as expected, it provoked a certain reaction in the market. For instance, the UK published the data on GDP for February and industrial production. All reports turned out to be weaker than the forecasts, which at first pushed the pound lower. However, bears failed to settle below Friday's low. This helped GBP to regain ground without any fundamental reasons. It seems that the British currency is looking for reasons to start a decline. On Tuesday, traders will be waiting for the data on US inflation. An increase in consumer prices may provoke a new round of growth in the US dollar, as the Fed is more likely to raise the rate by 0.5% in May. However, the reaction to this report may be absolutely different. Markets are already aware of the tough stance of the US regulator, so the inflation report may lose its significance.
GBP/USD on 5M chart
On the 5-minute time frame On Monday, the pair's movement was not so bad. In the European session, the price missed just a few pips to reach the level of 1.2981 where a buy signal could have been formed. Since this did not happen, the first signal was formed near the area of 1.3042-1.3049 from where the price rebounded. After the formation of a sell signal, the price managed to go down by only 19-20 pips. It was possible to set a Stop Loss to breakeven, but in this case, it did not play any role, since the pair failed to settle above the level of 1.3042 until the end of the day. Thus, beginners could have closed this trade manually with a minimum profit. Moreover, the second sell signal was formed near the same area of 1.3042-1.3049. Yet, the daily movements were not strong enough to bring real profit.
Trading tips on Tuesday:
Formally, there is a clear downtrend on the 30-minute time frame. The problem is that there is still no trendline or channel right now, so this trend has no clear direction. The pound continues to trade mixed, with a weak decline for a couple of days followed by a flat movement and then by a swing mode. That is, it is impossible to say now what type of movement we have. On the 5-minute chart on Tuesday, it is recommended to trade at the levels of 1.2981, 1.3042-1.3049, 1.3102, and 1.3156. When the price passes 20 pips in the right direction upon opening a trade, you should set a Stop Loss to breakeven. On Tuesday, the UK will release reports on unemployment, jobless claims and wages. Regardless of what the reports show, the market reaction is unlikely to be strong. A much stronger movement can be caused by the data on US inflation which is expected to reach 8.5%.
Basic rules of the trading system
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours, when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
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 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.