FX.co ★ How to trade GBP/USD on May 17. Simple trading tips and analysis for beginners

Analyzing Tuesday's trades:

GBP/USD on 30M chart

The GBP/USD pair showed classic "swings" on Tuesday. First, the pair fell, then rose, then fell again. Now let's try to figure out which of these movements were provoked by the macroeconomic background. The UK released two reports that can be considered important. The unemployment rate rose to 3.9% in March, and the number of claims for unemployment benefits increased by 47,000 with a forecast of -15,000. Both reports were negative for the pound, so it's not surprising that we initially saw a decline. However, literally half an hour later, the pound started to rise and quickly offset all morning losses. The growth spurt was certainly not related to data and was unfounded. The reaction to the US reports on retail sales and industrial production was about 10-15 points, which wasn't interesting. In the second part of the day, the pound fell again, as the Americans probably also decided to work out the disappointing data from Great Britain.

GBP/USD on 5M chart

There were several trading signals on the 5-minute chart on Tuesday, but even in the illustration above, it is perfectly visible that the movement was like a roller coaster. Therefore, it is not surprising that all signals formed around the same area, and all three turned out to be false. The first signal was formed after the UK data were published. It was physically difficult to work it out since it was necessary to enter the market when the pair fell rapidly. The second signal was formed on upward movements that seemed illogical. And the third signal was extremely inaccurate and unclear. Therefore, novice traders could open one or two positions, one of which was closed by a Stop Loss at break-even.

Trading tips on Wednesday:

On the 30-minute chart, the GBP/USD pair has finally started to decline, but it's difficult to anticipate how long this will last. The trend line is no longer formally relevant, but the downtrend could still persist if the decline resumes in the near future. We still believe that the pound should continue to decline, and we will consider any new rise, aside from a technical correction, as unfounded. On the 5-minute chart, you can trade at levels 1.2245-1.2260, 1.2351-1.2367, 1.2434, 1.2507-1.2520, 1.2597-1.2616, 1.2659, 1.2697. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Wednesday, only a speech by the Governor of the Bank of England, Andrew Bailey, is scheduled in the UK, which can be very interesting and important. In the US – only a minor report on the number of building permits, a reaction to which is unlikely to follow.

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.