Analysis of Thursday’s deals:
30M chart of the GBP/USD pair
The GBP/USD pair, one might say, was immobilized on Thursday. Despite the fact that the volatility was about 100 points, for the pound – this value has been nothing lately. Of course, the European Central Bank meeting had nothing to do with the British pound, but there were still US reports on GDP and durable goods orders. As it turned out today, the US economy grew by 2.6% q/q in the third quarter. Traders expected a slightly lower value, but in general the forecast corresponded to the fact. Thus, the dollar already had every reason to show growth. Further, durable goods orders rose 0.4% m/m in September, with forecasts ranging between 0.2% and 0.6%. That is, again, almost in complete coincidence of the forecast with the fact. Maybe that’s why the US currency practically did not rise during the day. In technical terms, the price fell to the ascending trend line, but ideally bounced off it in terms of accuracy and maintained the upward trend. Both major pairs continue to trade in a very similar way and still have chances to continue heading upward.
5M chart of the GBP/USD pair
In regards to the trading signals on the 5-minute timeframe, the pound’s picture was much simpler and clearer than on the euro. The first sell signal – overcoming the level of 1.1608 – was duplicated an hour later by a rebound from the level of 1.1608, so novice traders could open short positions. The price subsequently dropped to the level of 1.1550 and bounced off it twice, which should have been used to close shorts and open long ones. Profit on a short was 25 points. The first long from the level of 1.1550 was closed by Stop Loss at breakeven, the second one brought a profit of about 25 points, as the price rose back to the level of 1.1608. However, neither the first nor the second position could be opened at all, since the likelihood that the euro would pull the pound after the results of the ECB meeting were announced was high. In addition, important statistics were published in America, which could also provoke strong movements. Thus, newcomers could limit themselves to one position in the European session.
How to trade on Friday:
The pound/dollar pair resumed its upward movement on the 30-minute TF, but it’s too early to rejoice, but the expected fall did not happen. However, the Bank of England and the Federal Reserve will hold meetings next week, so from the very beginning of the week the market may begin to work out their results, which are already known with a 95% probability. Therefore, we will not be surprised if the British pound falls next week. On the 5-minute TF on Friday it is recommended to trade at the levels: 1.1356, 1.1443, 1.1479, 1.1550, 1.1608, 1.1648, 1.1716, 1.1755, 1.1793, 1.1863- 1.1877. When the price passes after opening a position in the right direction for 20 points, Stop Loss should be set to breakeven. There are no important events planned for Friday in the UK, and only a couple of minor reports in America, which are unlikely to attract the attention of market participants.
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 positions 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 positions are opened in the time period between the beginning of the European session and until the middle of the US one, when all positions 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 (14,22,3) 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.
The material has been provided by InstaForex Company – www.instaforex.com