FX.co ★ Trading plan for GBP/USD on May 28. Simple tips for beginners

Analyzing Monday's trades:

GBP/USD on 1H chart

GBP/USD continued to rise on Monday. The pound continues to trade upwards despite breaking the ascending trend line on Friday. Even though there were no reasons or grounds for buying the British currency on either Friday or Monday, the upward movement persists. The market continues to buy despite the fact that there was no news or reports yesterday. This upward movement is completely illogical and can only be traded if you completely ignore fundamental and macroeconomic events or during their absence. Even if the price consolidates below the trend line this week, it does not necessarily mean that a downtrend will follow.

GBP/USD on 5M chart

No trading signal generated on the 5-minute timeframe. The upward movement started from the level of 1.2725, but the price did not hit this mark. By the evening, GBP/USD approached the next resistance level of 1.2787, but again, it did not reach this mark. According to logic, there should be a rebound from the area of 1.2787-1.2791, but there is no logic behind the pair's movements and the market's actions right now. Therefore, the pound can continue to rise for an indefinite amount of time.

Trading tips on Tuesday:

On the hourly chart, the GBP/USD pair has great prospects for forming a downward trend, but the bullish correction remains intact. The fundamental backdrop continues to support the dollar much more than the British pound, but the pound continues to rise. Reports and speeches do not always support the pound, but the market interprets almost all the news in favor of the British currency.

Logically speaking, we expect the pound to fall on Tuesday, but considering the fact that the market doesn't need any reason to buy, the pound can still rise. Overcoming the trend line will not necessarily mean that a downward movement will follow.

The key levels on the 5M chart are 1.2372-1.2387, 1.2457, 1.2502, 1.2541-1.2547, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791, and 1.2848-1.2860. Today, there are no significant events scheduled in the UK or the US, so we might witness low-volatility and the pair could trade flat throughout the day. On the other hand, the pound could also rise, which can now grow under any conditions and circumstances.

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.