FX.co ★ How to trade GBP/USD on January 18. Simple trading tips and analysis for beginners

Analyzing Tuesday's trades:

GBP/USD on 30M chart

GBP/USD suddenly started a new upward movement on Tuesday. Recall that the day before, the price was below the ascending trend line, so the most logical scenario was the pair's decline. The only interesting event was the speech of Bank of England Governor Andrew Bailey, who said that he expected the British inflation to decline in 2023, based on a drop in oil and gas prices in recent weeks and months. I believe these words suggest that the British central bank may slow the pace of rate hikes once again, as it can now count on help from "low" energy prices. "Low" because they are not actually low and at least twice as high as they were before 2022. Thus, the pound could have fallen, but instead the market reinterpreted this information in favor of the pound, so it rose, ignoring even the technical signal to sell.

GBP/USD on M5 chart

There were few trading signals on Tuesday, but still there were some. During the European session, the pair rebounded from the 1.2171-1.2179 area, and then managed to rise to the 1.2245-1.2260 area. Unfortunately, it also managed to settle below this area before it continued to climb up. Therefore, novice traders could close the long positions with a profit of about 45 pips and open the short ones. The sell signal turned out to be obviously false, and an hour later, it was above the 1.2245-1.2260 area, so the short position closed with the loss of about 35 pips, "eating" the profit of the first deal. A new long position could also be opened, but it did not bring tangible profit, since the upward movement ended. This transaction could be closed manually closer to zero in the evening. There was no loss during the day, but the profit was small.

Trading tips on Wednesday:

GBP/USD can complete the upward movement on the 30-minute chart, since the trend line did not resist. However, Tuesday showed that the pound may continue to rise even without the fundamentals, and without paying attention to technical signals. Now, in case it settles below 1.2260, we can expect the pair to fall. On the 5-minute chart, it is recommended to trade at the levels 1.2008, 1.2057-1.2079, 1.2109, 1.2171-1.2179, 1.2245-1.2260, 1.2337-1.2343, 1.2371, 1.2444. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. The UK inflation report for December will be released on Wednesday and it is the most interesting report of the day. Inflation may slow down by 0.2%, which is very low and clearly not in line with Bailey's expectations. Then we only have minor reports in America.

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.