FX.co ★ How to trade GBP/USD on May 13, 2022. Tips and trade analysis for beginners

How to trade GBP/USD on May 13, 2022. Tips and trade analysis for beginners

Analysis of Thursday's trades: 30M chart of GBP/USD

 How to trade GBP/USD on May 13, 2022. Tips and trade analysis for beginners

On Thursday, GBP/USD left the sideways channel. The pair started to fall even before the release of disappointing macro reports in the UK. The price dropped by another 30 pips and retraced slightly up after data on US GDP and industrial production came out. The fact that the pair resumed the downtrend and left the sideways channel is really important. UK GDP came in at 0.8% in Q1. Industrial production decreased by 0.2% in March. These results had almost no effect on the market. A strong bullish correction is still expected. The current downtrend seems to be illogical. However, if nobody buys the pair, it cannot show growth.

5M chart of GBP/USD.

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 How to trade GBP/USD on May 13, 2022. Tips and trade analysis for beginners

In the M5 time frame, only one trading signal was made during the day. The pair has not traded so low for more than 2 years. Therefore, there simply cannot be many signals at the current levels. The price consolidated below 1.2250 with the level of 1.2071 seen as the closest target. However, it is impossible that the pair passes about 180 pips every day. In spite of the trend movement during the day, a profit could hardly be made. The only sell signal was created when the price returned to 1.2250 and bounced off it. The quote then went down by 40 pips. The trade could have been profitable in theory. Anyway, it should be closed manually. By the end of the day, the pair got back to 1,2250, so a potential profit could have decreased. In any case, with Stop Loss at the breakeven point (since the pair went down by more than 20 pips), there could not be any loss.

Trading plan for Friday:

In the 30M time frame, the downtrend goes on. The pound is weaker against the dollar as there are no bulls in the market. The pair may remain bearish for a long time because GBP already trades at its lowest levels. Moreover, there have been no factors that could trigger a new fall. Traders are now simply ignoring the factors providing support for the pound. Targets in the M5 time frame are seen at 1.2071, 1.2164, 1.2250, and 1.2379-1.2409. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction after a trade has been opened. Friday's macroeconomic calendar in the UK contains no important releases. Michigan consumer sentiment will be published in the US. The report could cause a reaction in the market if its actual reading miss the forecast (64.1).

Basic principles of the trading system:

1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.

2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to the Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.

3) During the flat trend, any currency pair may form a lot of false signals or produce no signals at all. In any case, the flat trend is not the best condition for trading.

4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.

5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.

6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.

How to interpret charts:

Support and resistance levels can serve as targets when buying or selling. You can place Take Profit near them.

Red lines are channels or trend lines that display the current trend and show which direction is better to trade.

MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.

Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, 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.

Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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