Trading plan for GBP/USD on November 2. Analysis and simple tips for beginners
Analysis of Wednesday trades:
GBP/USD 1H chart
By the end of the third trading day of the week, the GBP/USD pair once again tested the crucial 1.2107 level. Interestingly, this level has been breached multiple times, yet each time, the price returns and settles above it. The pair has been unable to initiate a new upward correction, which would be the logical course of action. As a result, the recent price activity over the past couple of weeks increasingly appears to be trading sideways in a range, commonly known as “flat” trading. Today, the pair had an opportunity to start a new correction cycle as U.S. macroeconomic data came in weaker than expected. The ISM Manufacturing Index unexpectedly dropped by 4 points and fell below the key 50 level. Additionally, the ADP employment report also came in below forecasts. Only the JOLTs job openings report slightly exceeded expectations, making it two negative indicators against one positive. The dollar had a chance to decline, but the market did not capitalize on it. It’s worth noting separately that the Federal Reserve kept interest rates unchanged, as was expected.
GBP/USD 5M chart
On Wednesday, the 5-minute time frame yielded only a few trading signals, with price action mostly resembling sideways or “flat” trading. The first buy signal only formed at the beginning of the American trading session, triggered by a bounce from the 1.2089-1.2107 area. A quick rise ensued, largely driven by weak economic data from the United States, and the price reached the 1.2164 level. This is where traders should have locked in profits on their long positions, yielding a gain of 30 points. A bounce from the 1.2164 level could have been utilized to open short positions, which would have also resulted in a profit of 20 points, as the price descended back to the 1.2107 level over the next few hours.
Trading ideas for Thursday:
On the hourly time frame, we had been anticipating a new upward correction cycle for the GBP/USD pair, but the previous one ended prematurely, and a new one is yet to commence. The pair could resume its downward trend immediately, but there’s still a lingering sense that the correction is incomplete. The 1.2107 level failed to hold the pair’s decline for the fifth time, yet even after breaking through this level, the drop did not continue. We believe that a new cycle of upward movement within the correction might be possible this week, provided that the fundamental and macroeconomic backdrop does not turn out to be detrimental for the pound. On the 5-minute time frame tomorrow, the key levels are: 1.1992-1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2179, 1.2235, 1.2270, 1.2372-1.2394, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2653, and 1.2688. If the price moves 20 points in the desired direction after the trade is opened, set a stop loss to break even. On Thursday, the Bank of England will announce its rate decision, while in the United States, only one minor report is expected. The market’s direction will largely hinge on the rhetoric from Andrew Bailey, the Bank of England Governor, and the outcome of the rate vote.
Basic rules of a trading system:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
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