FX.co ★ Trading plan for GBP/USD on August 9. Simple tips for beginners

Analyzing Tuesday's trades:

GBP/USD on 30M chart

On Tuesday, the GBP/USD pair experienced both upward and downward movements. From a technical perspective, these movements were quite logical. After the pair settled below the level of 1.2750, it dropped to the level of 1.2688, bounced off it, and returned to 1.2750. As a result, one can come to the conclusion that the pair continues its bullish correction after breaking the descending trendline. As there are no substantial reasons for Sterling to rise in the medium term, the correction might be sluggish. We still expect the pound to fall, as we consider it highly overbought and expensive. The market has already played out all the bullish factors, and there are no new reasons to open long positions in the long-term.

Yesterday, there were no significant events in either the United Kingdom or the United States, which meant that all intraday movements were purely technical. The corrective phase might persist for some time, but now, the dollar is in a much more favorable position after an 11-month decline.

GBP/USD on 5M chart

Multiple entry signals were formed on the 5-minute chart. The pair initially breached the level of 1.2748, which was a sell signal. Beginners were supposed to open short positions while aiming for 1.2688, a target that the pair reached at the beginning of the US session. The two rebounds from the aforementioned level were considered buy signals. By the evening, the pair returned back to 1.2750, where you should have taken profit. The first trade managed to earn around 35 pips, and the second one around 30 pips. Consequently, Tuesday turned out to be a fairly good day.

Trading tips on Wednesday:

On the 30-minute chart, the GBP/USD pair broke the short-term downtrend. Now, the pound may correct higher, but we shouldn't expect a strong uptrend. We expect the pound to fall, as we still believe it is overbought and unreasonably expensive. The key levels on the 5M chart are 1.2538, 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2791-1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Wednesday, there are no important events or reports lined up in the US and the UK, so we should brace ourselves for moderate or low levels of volatility with no trends. Maybe the pair will gradually rise within the framework of the correction.

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.