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Trading plan for GBP/USD on October 23. Simple tips for beginners
October 23, 2023 4:23 amVideo
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Analyzing Friday’s trades:
GBP/USD on 30M chart
GBP/USD came under renewed bearish pressure on Friday. The price declined to the 1.2107 area, from which it rebounded for the second time, though it was not done precisely. Nevertheless, the British pound remains near a level that is as close as possible to its recent local low, preventing it from falling further. Therefore, we expect a new corrective phase, and the pound may try to catch up with the euro, which has already started forming its second upward wave. On the other hand, the macroeconomic backdrop weighed on the British currency as most of the economic reports turned out to be weak.
On Friday, the UK released a weak retail sales report that exerted downward pressure on the pound. The decline wasn’t significant, but it held back the pound from rising within the correction. Nonetheless, we believe that the pair can return to the 1.2325 level.
GBP/USD on 5M chart
Not the best trading signals on the 5-minute chart. If we look at the hourly chart, we can see that the pair mostly moved sideways. Therefore, it’s not surprising that the signals left much to be desired. On Friday, the pair initially settled below the 1.2107 level, and this sell signal turned out to be false. Later, a buy signal appeared around the same level, and the price rose to the 1.2164 level, which made it possible to gain 40 pips. The first trade resulted in a loss of 20 pips. As a result, the day ended with a small profit.
Trading tips on Monday:
On the 30-minute chart, GBP/USD might revert to its medium-term downtrend. However, a new phase of the upward correction may also start. We advise newcomers to use the 1.2107 level as a reference point. If the pair breaches this mark, the downtrend will likely resume. If not, the corrective phase will remain intact. The current situation is not clear. However, we are also factoring in a more pronounced pair correction. The key levels on the 5M chart 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, 1.2688. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Monday, there are no important or interesting events lined up for the UK and the US. Therefore, the GBP/USD pair will likely go through low volatility but the pound has the opportunity to correct higher .
Basic trading rules:
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.
Beginners 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.
The material has been provided by InstaForex Company – www.instaforex.com
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