30M chart of the GBP/USD pair
The GBP/USD pair collapsed on the 30-minute timeframe on Thursday, passing about 230 points in a day. It's even hard to remember when the last time a pair passed so much! However, today the Bank of England summed up the results of its meeting in Great Britain, and the meetings of the central banks are the most important event in the foreign exchange market. And most importantly, it is almost always unpredictable. "Unpredictable" not even in terms of decisions made by this or that central bank, but in terms of the market's reaction to this event. For example, today, the decisions made by the BoE did not contribute to the fall of the pound at all. Three instead of two earlier members of the monetary committee voted to cut the stimulus program, and two voted to raise the rate. And this despite the fact that a week ago there was no talk of raising the rate at all! However, the market interpreted these hawkish messages in its own way. It expected that the rate would be raised today, with the help of many well-known banks and experts, but these expectations did not come true. And it turns out that the pound fell simply because expectations were not met. Although where did these expectations come from? On what basis? Thus, there is a downward trend at this time on the 30-minute timeframe.
5M chart of the GBP/USD pair
The technical picture on the 5-minute timeframe was very attractive today. Still, the pair passed 230 points in a day. However, at the same time, it was quite complicated, and there were a lot of trading signals. Let's figure out which trades should have been opened. The first sell signal should have been worked out when the price crossed the 1.3638 level. It turned out to be quite risky, but at the same time profitable. Although not everything is so simple. Stop Loss for a short position was not set, since the price did not go down 20 points before the US trading session. Thus, the deal should have remained open when the BoE announced the results of the meeting and the collapse began. At the same time, we recommend that novice traders exit the market before important events. Thus, we will assume that the newbies left the market and the trade was closed. The next sell signal should have been worked out when the price settled, and then bounced off the level of 1.3571. Here it was already possible to open positions without fear, and they turned out to be profitable, as the price continued to move down and overcame the level of 1.3517 on its way. In total, the price went down another 85 points, which was enough to trigger any Take Profit or to close the deal manually at any profit.
How to trade on Friday:
At this time, a downward trend has formed on the 30-minute timeframe. Thus, at this time, we can consider the sell signals from the MACD indicator, since now there is already a trend line. However, it is also necessary to wait now for the correction turn, during which the indicator is discharged to the zero level. On the 5-minute timeframe, the important levels are 1.3415, 1.3517, 1.3571, 1.3612, 1.3638. We recommend trading on them on Friday. 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. Novice traders should pay attention to the NonFarm Payrolls report in the US on November 5. This is the most important report of the day and can provoke a strong 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.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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