FX.co ★ How to trade GBP/USD on May 3. Simple trading tips and analysis for beginners

Analyzing Tuesday's trades:

GBP/USD on 30M chart

The GBP/USD pair also continued its rather unconvincing downward movement on Tuesday, and closer to the evening it began to trade higher. The UK only published its Manufacturing PMI for April, which turned out to be worse than forecasts but exceeded the value of the previous month. We can't say that the pound fell due to this index, since the euro also fell at the same time. But there is no significant difference: the pound showed a weak decline and overcame another uptrend line, which means absolutely nothing. The pound has been falling for just two days, so we can't draw long-term conclusions. Growth may resume on Wednesday if Powell's stance turns out to be dovish. Considering that the Federal Reserve is likely to end the monetary tightening cycle, this scenario is quite likely.

GBP/USD on 5M chart

Trading signals on the 5-minute chart were not the best. The levels 1.2507 and 1.2520, as well as levels 1.2466 and 1.2477, should be considered as areas. But even between these areas, the distance was only 30 points, so all four levels should be considered as an area. Trading between them made no sense, as the level of potential profit was much lower than the possible loss. The same applies to sell signals for consolidating below the 1.2466 level. In this case, a Stop Loss should be set above 1.2520, which made potential losses too high. Therefore, beginners should not have opened positions on Tuesday.

Trading tips on Wednesday:

On the 30-minute chart, the GBP/USD pair in the medium-term continues to move upward or, at least, does not decrease, which is clearly visible on the 4-hour chart as well as higher ones. Movements are mostly illogical, as is the market's reaction to fundamental and macroeconomic events. Overcoming the trend line gives certain chances for the dollar's growth, but this week there will be many important events that can return the pair to an upward course. On the 5-minute chart, you can trade at levels 1.2245-1.2260, 1.2343-1.2360, 1.2396, 1.2466-1.2477, 1.2507-1.2520, 1.2577-1.2597-1.2616, 1.2659-1.2674. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, there are no important reports and events planned in the UK, so all the most interesting things will happen during the US trading session. The ISM index is the most important, but the ADP report may also provoke a small market reaction. In the evening, we have the results of the Fed meeting, but by that time beginners should have already left the market.

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.