How to Trade the GBP/USD Currency Pair on November 5? Simple Tips and Trade Breakdown for Beginners

Ben Graham · Novembro 5

Trade Breakdown for Tuesday:

1H Chart of the GBP/USD Pair

The GBP/USD pair continued its downward movement on Tuesday. This time, the decline of the British currency was "provoked" by a new speech from the UK Chancellor of the Exchequer, Rachel Reeves. It's noteworthy that in recent months, almost every speech by Reeves triggers a crash in the British currency. Initially, such market reactions could be seen as justified, but yesterday they were not. The British pound has been falling for over a month for absolutely any reason. Even when no reasons exist, it continues to decline. Therefore, the new speech from Reeves was just another excuse for the pound to drop even lower. Reeves reported yesterday morning that the government would need to make "difficult decisions" in the new budget for next year and that some taxes would be increased. However, discussions about tax hikes in the UK have been ongoing since the summer. This news is not new. Yet, the market still uses any formal reason to sell.

5M Chart of the GBP/USD Pair

On the 5-minute timeframe, two decent sell signals were formed on Tuesday. During the European trading session, the area of 1.3102-1.3107 was breached, prompting the pair to drop to 1.3043 during the American session. It subsequently breached that level as well. Thus, novice traders had reasons to open short positions in the morning, and by the end of the day, they could have locked in a profit of about 70 pips.

How to Trade on Wednesday:

On the hourly timeframe, the GBP/USD pair continues to form a new downward trend. The British pound is declining again for absolutely any reason. As we mentioned earlier, there are no grounds for a prolonged rise in the dollar, so we expect only upward movement in the medium term. However, the flat factor in the long term continues to pull the pair down —an absolutely illogical development.

On Wednesday, novice traders can comfortably trade in the range of 1.2980-1.2993 or at the 1.3043 level, between which the pair is currently trading. Overall, even from a technical standpoint, this downward movement has long been overdue for a conclusion.

On the 5-minute timeframe, trading can currently be done at 1.2913, 1.2980-1.2993, 1.3043, 1.3102-1.3107, 1.3203-1.3211, 1.3259, 1.3329-1.3331, 1.3413-1.3421, 1.3466-1.3475, 1.3529-1.3543, 1.3574-1.3590. On Wednesday, there are no significant reports or events scheduled in the UK, whereas in the US, the ISM manufacturing index and the ADP report on private sector employment changes will be released. These are important reports, but will the market take notice?

Main Rules of the Trading System:

The strength of the signal is assessed based on the time it took to form the signal (bounce or breach of a level). The shorter the time, the stronger the signal.
If two or more trades have been opened around a certain level on false signals, all subsequent signals from that level should be ignored.
In a flat market, any pair can generate a multitude of false signals or may not form any at all. In any case, at the first signs of a flat, it's better to stop trading.
Trading deals are opened during the time period between the beginning of the European session and the middle of the American session, after which all deals should be closed manually.
On the hourly timeframe, it is advisable to trade on signals from the MACD indicator only when there is good volatility and a trend that is confirmed by a trend line or trend channel.
If two levels are too close to each other (between 5 and 20 pips), they should be treated as a support or resistance area.
After moving 20 pips in the right direction, a Stop Loss should be set to breakeven.

What is on the Charts:

Support and resistance price levels are targets for opening buy or sell positions. Take Profit levels can be placed around them.
Red lines indicate channels or trend lines that reflect the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) — histogram and signal line — is an auxiliary indicator that can also be used as a source of signals.

Important speeches and reports (always available in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be done with maximum caution, or traders should exit the market to avoid a sharp reversal in price against the preceding movement.

Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and money management are keys to success in trading over the long term.

The material has been provided by InstaForex Company - www.instaforex.com