FX.co ★ How to trade GBP/USD on March 4, 2022. Tips and trades analysis for beginners

Analysis of Wednesday's trades:

30M chart of GBP/USD

The pound/dollar pair resumed its downward movement on Thursday and was sliding almost all day long. The pound is now heading towards its swing lows at around 1.3272. The quote is now feeling bearish pressure as sellers keep pushing it down. The market shows no reaction to any macroeconomic data. Nonfarm Payrolls will be released in the United States on Friday. The report may somewhat affect the market. On Wednesday, Fed Chairman Jerome Powell said he would back a quarter point hike, effectively putting to rest debate over starting a round of rate hikes with a larger than usual half-point increase. Consequently, the greenback dropped but then recouped losses in a couple of hours. Generally speaking, markets are buying out the US dollar amid geopolitical risks related to the armed conflict in Ukraine, thus boosting its growth.

M5 chart of GBP/USD

In the M5 time frame, the quote moved in a trend, but just three trading signals were produced during the day. All of them were generated near the 1.3365 level. The price failed to rise by 20 pips after the first two buy signals had been made. Therefore, beginner traders could not have placed a stop-loss order at the breakeven point. Consequently, just one long position could have been opened and closed when the price settled below 1.3356 and a sell signal was made. The first trade turned out to be unprofitable. As for the short position, the price went down by 30 pips, and beginner traders were able to close it manually by the end of the day and receive a profit that offset losses of the first trade. Overall, it was not a productive trading day. The price is expected to drop to 1.3272 and break through it shortly, marking its third breakout attempt.

Trading plan for Friday:

In the 30M time frame, the bearish trend has resumed, and the pound sterling, as a risk asset, is descending. The trend is expected to remain bearish in the next several days. The price is hovering around its swing lows, confirming bearish bias. The target levels in the 5M time frame are seen at 1.3241, 1.3272, 1.3310, 1.3365, 1.3417, and 1.3440. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction. The construction PMI is scheduled for release in the United Kingdom on Friday. It will unlikely affect the market. In the United States, Nonfarm Payrolls will be published. Traders may ignore the outcome of the report as well, especially if it comes in line with the market forecast (400K). Other reports will be of secondary interest. Therefore, markets will focus their attention solely on the geopolitical situation and Nonfarm Payrolls.

Basic principles of the trading system:

1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.

2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.

3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading.

4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.

5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.

6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.

How to interpret charts:

Support and resistance levels can serve as targets when buying or selling. You can place Take Profit near them.

Red lines are channels or trend lines that display the current trend and show which direction is better to trade.

MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.

Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, 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.

Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.