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How to trade GBP/USD on January 20? Simple tips for beginners

Analysis of previous deals:

30M chart of the GBP/USD pair

The GBP/USD pair, having shown a good downward movement over the past three days, began a round of upward correction on Wednesday. This upward movement led to the fact that the pair left the descending channel, but yesterday we warned that this could happen. At the moment, we can conclude that the downward trend is over, but we believe that it can recover. But to do this, you now need to rebuild the descending channel so that it signals a downward trend again. This could not be done on Wednesday. Nevertheless, consolidating above the channel could be used as a buy signal. Several dozen points could be earned, since the overall volatility of the day was low. We also want to note that a report on British inflation for December was published today. This indicator continued to grow, as in many other countries of the world. For example, in the US or the European Union. The inflation growth factor in most cases can be regarded as bullish for the currency. The pound has grown today, however, please note that the British currency started rising later than the release of the reports. So it could just be a coincidence.

5M chart of the GBP/USD pair

On the 5-minute timeframe, the movement of the pound/dollar pair was not the best and it was also inconvenient for traders. The pair formed two signals during the European trading session when it first overcame the 1.3598-1.3603 area from top to bottom, and then from the bottom up. The first signal did not bring profit to novice traders, as the price could not go down even 10 points. But the second one allowed us to open long positions and earn several dozen points. This profit made it possible to cover the loss on the first transaction. It was necessary to close the deal manually in the late afternoon, since the nearest target level of 1.3652 was not reached. In general, the trend movement was observed only at the end of the European trading session. The beginning of the European session and the entire US session were held in a sideways movement.

How to trade on Thursday:

The downward trend was reversed very quickly on the 30-minute TF. Therefore, it is even possible to consider long positions now, but we still expect that the pair’s decline may resume. The descending channel was too unstable, it was quite easy to get out of it, since any one round of correction was needed. Thus, if you buy the pair using buy signals, then only with a half lot. On the 5-minute TF tomorrow, it is recommended to trade by levels 1.3521-1.3531, 1.3572, 1.3652-1.3660, 1.3688-1.3695. The macroeconomic and fundamental background will be absent tomorrow for the pound/dollar pair. There are minimal chances that market participants will pay attention to the report on applications for unemployment benefits in the United States, but these chances are so minimal that they are not even worth talking about. In principle, tomorrow the pair may even continue to adjust, and it will be possible to navigate the movement only by technical signals.

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 deals 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 deals are opened in the time period between the beginning of the European session and until the middle of the American one, when all deals 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

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