Analyzing Friday trades:
GBP/USD on 30M chart
GBP/USD repeated all the movements of EUR/USD on Friday. On the one hand, this is a good thing because both major currency pairs have always traded in a very similar manner. On the other hand, the pound repeated all the same inadequate moves, which defy any analysis and logic. In principle, there is nothing to discuss about Friday's movements. Traders had the same US reports on unemployment, wages and the labor market at their disposal, which turned out to be quite strong. Therefore, the dollar's growth could and should have been expected, but its subsequent decline was not. As a result, the pound broke the uptrend at first (by settling below the trend line), then it regained it, without correcting properly, and the fundamental and macroeconomic background was eventually ignored. That way the pair can continue rising, but at the same time the strong downtrend may start suddenly, and there is no way to connect it with any event. So now it is necessary to trade using technical signals, not paying attention to the fundamental background.
GBP/USD on M5 chart
As for trading signals on the 5-minute chart, the situation was difficult. The pair formed three signals in the area of 1.2245-1.2260 during the European trading session, each of which turned out to be false. First, there was a sell signal, after which the price did not even go down by 20 pips. Then there was a buy signal, but the pair did not even go past 20 points, hence a Stop Loss was triggered. The third signal should not have been used. Afterwards, there was a collapse, triggered by the NonFarm Payrolls report, and the next signal was formed near the level of 1.2141, and it was a buy signal. Naturally, we would expect the dollar to rise after such strong statistics from the US, so the buy signal should not be used. If someone did (we mentioned that the fundamental background can be ignored), then that person received good profit, because by the end of the day the pair grew as much as it had fallen on Friday. In general, the overall profit depended on how traders correlated the trading signals with the macroeconomic background.
Trading tips on Monday:
The pair started to form a downtrend on the 30-minute time chart, and quickly finished its "ordeal" with it. The pair grew by 360 points on Wednesday-Thursday, breaking the current technical picture, and with it a new, emerging downtrend. Now we can expect the pair to fall at any time, despite the renewal of the uptrend. However, it is impossible to predict when it will start to fall. On the 5-minute TF tomorrow, it is recommended to trade at the levels 1.1950-1.1957, 1.2064-1.2079, 1.2141, 1.2186-1.2205, 1.2245-1.2260, 1.2329- 1.2337, 1.2371, 1.2471-1.2477. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Monday, the UK will release business activity reports, as well as in the US. But a more important ISM will come out in the US. However, the main question is, when will the market start to react logically to the macroeconomic background?
Basic rules of the trading system:
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
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 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.