FX.co ★ Trading plan for GBP/USD on October 31. Simple tips for beginners

Analyzing Monday's trades:

GBP/USD on 30M chart

On Monday, GBP/USD failed to climb above the level of 1.2107 and started moving higher again. There were no interesting events for the British pound or the dollar, so the growth was purely technical. As with the euro, there are numerous important events and reports this week, so the price could repeatedly change direction. It is impossible to predict its position by the end of the week. We have already mentioned that we are waiting for another, more convincing leg of the corrective move. Perhaps with the help of fundamental and macroeconomic factors, the pound will manage to form a more pronounced corrective phase this week. The key is that the background is in its favor.

GBP/USD on 5M chart

On the 5-minute chart, there were few trading signals generated, which was a good thing because volatility was relatively modest. Nevertheless, during the European session, the pair rebounded from the 1.2089-1.2107 area, afterwards it managed to rise to the 1.2164 level. As a result, you could earn about 30 pips using a long position. Traders could also execute the sell signal around the 1.2164 level, but the price could not start a downward movement or resume growth by the end of the day. Therefore, the short position closed at break-even. In general, it wasn't the best day, but you could still earn a small profit.

Trading tips on Tuesday:

On the 30-minute chart, we were expecting a new leg of the upward correction, but it ended too soon. The pair can resume the downtrend right now, but the corrective phase still seems incomplete. The 1.2107 level may keep the pair from falling for the fifth time, but even after the pair breached this mark, the downward movement did not start. We believe that a new leg of upward movement within the correction is possible this week if the fundamental and macroeconomic backdrop does not exert significant downward pressure for the pound. The key levels on the 5M chart are 1.1992-1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2179, 1.2235, 1.2270, 1.2372-1.2394, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2653, and 1.2688. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. There are no significant events lined up in the UK and the US, so the pair may mimic the EUR/USD pair's movements. The GBP/USD pair will likely go through low volatility on Tuesday.

Basic trading rules:

1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.

4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.

5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.

6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.

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 represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.

The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.

Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.

Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.