Analysis of previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair continued to correct against the downward trend on Monday, November 15, which is supported by the trendline, which is supported by the downtrend line. Thus, tomorrow the price can work out the trend line and either bounce off it or overcome it. A price rebound from the trend line can be regarded as a rather strong sell signal. And breaking this line is like a buy signal. At the same time, we would like to draw the attention of newcomers to the fact that Monday's movements were very weak and that the strangest thing is that the euro/dollar pair showed much stronger volatility than the pound/dollar pair. The US currency rose in price against the euro, but fell in price against the pound. This is a very rare occurrence, especially with an empty calendar of macroeconomic events. In fairness, it should be noted that today the heads of the ECB and the Bank of England Christine Lagarde and Andrew Bailey made speeches. However, neither the first nor the second made statements that could provoke a strong movement in the pair. Actually, the pound/dollar pair did not show any movement today, and the euro/dollar pair began to fall in the evening, when Lagarde's speech ended.
5M chart of the GBP/USD pair
On the 5-minute timeframe, there were a lot of trading signals on Monday, and this is very bad, since the pair was trading mostly sideways for most of the day. This means that a large number of false signals could be generated. This is what happened in practice. All signals were formed around the levels of 1.3415-1.3424, and after the first two signals, one should have stopped trading and never entered the market. The first sell signal turned out to be so weak that the price after its formation did not go down a single point and immediately began to move upward, breaking through the 1.3415-1.3424 area in a few hours. Therefore, the short position should have been manually closed and opened long positions, although it was already clear at that time that the likelihood of a flat was high. Nevertheless, novice traders could open short positions, which could only earn a few points of profit. And they could be closed at any time, since below the area of 1.3415-1.3424 the price could no longer leave and, naturally, did not reach the nearest target and did not go up 40 points. On the very first deal, a loss of 20 points was received.
How to trade on Tuesday:
At this time, the downward trend continues on the 30-minute timeframe. Now we need to understand whether the pair will be able to overcome the downtrend line. If yes, then the upward movement will continue, if not, then the downward movement will resume. On the 5-minute timeframe, the important levels are 1.3304, 1.3363, 1.3415-1.3424, 1.3470, 1.3517. We recommend trading on them on Tuesday. The price can bounce off them or overcome them. As before, we set Take Profit at a distance of 40-50 points. At the 5M TF, you can use all the nearest levels as targets, but then you need to take profit, taking into account the strength of the movement. When passing 20 points in the right direction, we recommend setting Stop Loss to breakeven. Unemployment and wages report will be published in the UK on November 16, but novice traders should pay more attention to the report on retail sales in the US. Although the morning reports can also provoke a slight market reaction.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the US one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, 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 on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
