Analysis of Monday's Trades
1H Chart of GBP/USD
The GBP/USD pair continued its upward trend on Monday, which is more difficult to explain than the euro's growth. While the euro had a clear growth driver from the German inflation report (although it may have been influenced by insider information for major market players), the pound sterling lacked any obvious catalysts. As a result, for the third consecutive day, traders are searching for reasons behind the movements of the pair. The pound could have simply followed the euro's lead, or it may be related to the U.S. dollar, where large market players began closing long positions. However, the exact reason remains unclear. Currently, the price has broken through the critical level of 1.2502, which it previously bounced off six times from above. This breakthrough suggests that the pound's upward movement may continue today.
5M Chart of GBP/USD
On the 5-minute timeframe on Monday, several trading signals were generated. Initially, the price broke through the 1.2445 level, presenting an opportunity for novice traders to open long positions. Shortly after, the pair broke through the 1.2502-1.2508 range, and within another half hour, it reached the 1.2547 level, rebounding from it three times. At this point, traders had the option to close their long positions and open short ones. Later, the price fell back below the 1.2502-1.2508 range, leading to some chaotic movement in the market. In this area, traders could close their short positions as well. Both types of trades proved to be profitable.
Trading Strategy for Tuesday:
In the hourly timeframe, the GBP/USD pair has moved out of its holiday flat phase and has resumed its primary trend. In the medium term, we expect the pound to continue its decline, as this seems to be the most logical outcome. Therefore, traders should mainly anticipate a downward movement while relying on technical signals. The results of the Bank of England (BoE) and Federal Reserve (Fed) meetings support this downward direction. In the short term, the pound may experience a new correction.
On Tuesday, the GBP/USD pair could continue to correct, targeting the 1.2613 level. We do not expect a significant rise in the pound.
On the 5-minute timeframe, the following levels are relevant for trading: 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993. On Tuesday, there are no major events or reports scheduled in the UK. However, the pound may move in response to the euro's direction, similar to its behavior yesterday. In the U.S., two important reports will be released: the ISM Services PMI and JOLTs Job Openings.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 20 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
