FX.co ★ Trading plan for GBP/USD on February 7. Simple tips for beginners

Analyzing Tuesday's trades:

GBP/USD on 1H chart

GBP/USD started a corrective move against the two-day decline. It is worth noting that it was completely logical for the pound to fall, as on Friday, the market received strong US data on business activity, labor market, and unemployment, and on Monday, Federal Reserve Chair Jerome Powell gave good information about the central bank's plans to lower the interest rate. However, on Tuesday, there were no positive news for the dollar, and the market rightfully decided that it was time to start a correction.

It is also worth noting that the level of 1.2611, towards which the price is currently heading, is the lower boundary of the sideways channel within which the pound has been trading in for a month and a half. Therefore, a rebound from this level may bring back the downward movement. On the other hand, overcoming it may return the pair to a flat phase and set a "false" flag for breaking out of the sideways channel. No significant data was published in either the US or the UK.

GBP/USD on 5M chart

The movements on the 5-minute timeframe were quite decent. Initially, the pair surpassed the level of 1.2544 and then rebounded from it, although it wasn't too accurate. Thus, two buy signals were formed, duplicating each other. Based on these two signals, beginners could open one long position, which brought them a profit of about 30 pips by the end of the day. This is an excellent result, considering the day's movement and its corrective nature.

Trading tips on Wednesday:

On the hourly chart, GBP/USD has left the sideways channel of 1.2611-1.2787. Last week as well as Monday's fundamental and macroeconomic background only supported the dollar, so the euro should have started to fall earlier than Friday and the decline would have been more pronounced. But it's good that at least the pair left the sideways channel in which it was in for a month and a half. Now the main thing is that the pair shouldn't return to it immediately. The reference point is the level of 1.2611.

The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2688, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. On Wednesday, there are no scheduled reports lined up in the UK and the US. Therefore, traders will have nothing to react to. We believe that in such conditions, it will be easier to understand whether the price's exit from the sideways channel was a false signal. If the price overcomes the level of 1.2611 on Wednesday, then yes.

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, after 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 trendline 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.