FX.co ★ Trading plan for GBP/USD on May 30. Simple tips for beginners

Analyzing Wednesday's trades:

GBP/USD on 1H chart

GBP/USD continued its downward movement on Wednesday, which started after the price bounced from the 1.2787 level. The pound breached the ascending trend line, but this isn't the first time it happened. Similar instances have occurred in the past and none of them initiated a solid downward trend. Therefore, we would refrain from placing hopes on a downtrend just yet, even though we are expecting the pound to fall. We should face the fact that over the past 6-9 months, the market has been buying the pound much more frequently than the situation, fundamental, and macroeconomic background would require. It is possible that this time too, the downward move will end with just a simple pullback, after which GBP/USD will resume its groundless growth.

Yesterday, there were no significant or even secondary events that could have influenced the pair's movement during the day.

GBP/USD on 5M chart

Only one trading signal was formed on the 5-minute timeframe. During the US session, the price broke through the 1.2725 level and then managed to drop to the 1.2691 level. Furthermore, novice traders could have remained in short positions from Tuesday when a sell signal was formed around the 1.2787 level. While we do not generally recommend carrying intraday trades over to the next day, there are certain situations where it could be done. Today, you should pay attention to the 1.2691 level. Breaking through this level will allow traders to stay in short positions with 1.2648 as the target.

Trading tips on Thursday:

On the hourly chart, the GBP/USD pair has great prospects for forming a downward trend, but it could still correct higher. The fundamental backdrop continues to support the dollar much more than the British pound. Macroeconomics and fundamentals 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 Thursday, 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 guarantee that a downtrend will start.

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, 1.2848-1.2860. Today, there are no significant events scheduled in the UK. The US docket will feature reports on initial jobless claims and the GDP numbers for Q1. We believe that these reports may only provoke only a minor market reaction.

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.