FX.co ★ Trading plan for GBP/USD on July 20. Simple tips for beginners

Analyzing Wednesday's trades:

GBP/USD on 30M chart

The GBP/USD pair finally showed the movement we have been waiting for a long time. The British pound literally plummeted after the release of the UK inflation report for June, which, by the way, was not that significant. However, inflation still fell more than expected, and core inflation also dropped. Therefore, the market may have assumed that the Bank of England will not raise rates any further (beyond the planned or currently expected level). And if so, there are no theoretical grounds left for the British pound to continue its ascent.

We believe that it is time for the pound to fall, and significantly and for a long time at that. It has risen by nearly 30 cents in less than a year, which is a substantial increase. If there were concrete and good reasons for such strong growth, there would be no questions. However, what strength does the British pound have if the BoE raises rates, but they still remain lower than the rates of the Federal Reserve, and that the US central bank is increasing its rates in parallel?

GBP/USD on 5M chart

Three trading signals materialized on the 5-minute chart. Unfortunately, it was not possible to catch the very beginning of the pair's decline because the reaction to the report was swift. In just 5 minutes, the pair fell by 60 points, but then continued its downward movement, which also provided opportunities to make profit. The first sell signal was formed when the pair breached the 1.2981-1.2993 area. You could open shorts on this signal. Later, the pair fell below the level of 1.2913. The trade could be closed manually or based on a buy signal near the level of 1.2913. The profit on this trade ranged from 50 to 80 points.

Trading tips on Thursday:

On the 30-minute chart, the GBP/USD pair finally experienced a sharp decline, and it finally responded to the macroeconomic background as it should. We believe that the pound should continue its downward movement. Perhaps not immediately, but it should. The pound is still heavily overbought and has no grounds for further growth. The key levels on the 5M chart are 1.2779-1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043, 1.3107, 1.3145, 1.3210, 1.3241, 1.3272. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Thursday, there are no important events lined up in the UK. The US will release a report on unemployment claims. Therefore, both the pound and the dollar should not receive strong support.

Basic trading rules:

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 read charts:

Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels 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.

Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.