FX.co ★ How to trade GBP/USD on March 8, 2022. Tips and trades analysis for beginners

Analysis of Monday's trades:

30M chart of GBP/USD

On Monday, GBP/USD plunged further. Although no significant reports had been published in the United States or the United Kingdom, the market found a reason for a sell-off. At the end of the day, the pound lost 125 pips. The downtrend is now visible to the naked eye, so no trendline or channel is still needed. The levels the pair is now at were formed over a year ago. No wonder, they won't be able to neither provide support or resist the pair. Like the euro, the pound may plunge in the coming days/weeks/ months. However, if the geopolitical situation starts to improve and a breakthrough is achieved in the peace talks between Moscow and Kyiv, the euro and the pound will be able to strengthen. So far, the situation is very complicated, and the market keeps selling off risk assets.

M5 chart of GBP/USD

In the M5 time frame, a correction occurred. If not for the corrective move, the technical picture would look perfect. Since the beginning of the correction was impossible to predict, traders were guessing whether it would emerge or not. There had been no rebound from an important level before the correction started. Most of the trading signals of the day cannot be called either false or strong. The first sell signal was made very late. The price broke through 1.3173 and went down by 23 pips, which was enough to place a stop-loss order at the breakeven point. Therefore, beginner traders did not suffer any losses. A buy signal was produced, and the price went up by 20 pips. In that case, the novice did not sustain any losses as well. Two more signals near 1.3173 should have been ignored because the previous two turned out to be false and brought no profit at all. The last sell signal near 1.3134 should have been ignored as well because it was produced very late, and the price had already gone down by 120 pips.

Trading plan for Tuesday:

In the 30M time frame, the bearish trend got stronger on Monday. It is now hard to tell where the price will go as there are just a few signals and all of them are weak enough. In addition, it remains unclear how long the geopolitical situation will be weighing on the market. The target levels in the 5M time frame are seen at 1.3082, 1.3134, and 1.3241. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction. No important fundamentals or macroeconomic events are expected in the United Kingdom on Tuesday. The focus will be solely on the geopolitical background. However, even its absence does not guarantee the beginning of a correction or a lack of downward movement. From the technical point of view, the situation with the pound is rather complex as there are not enough reference points.

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.