Analysis of Monday's Trades

1H Chart of GBP/USD

The GBP/USD pair fell to the 1.2107 level on Monday, where it rebounded and began a new corrective move. This 100-pip bounce should not be misleading; it is not sufficient to break the current downtrend. The price encountered a strong resistance level on its path, which contributed to this minor increase. However, the decline of the pair may resume as early as today. Inflation reports for December will be released in both the UK and the US tomorrow and the day after, making these key events of the week. These reports could trigger a surge in the US dollar, possibly causing the pound sterling to continue its downward trend. On Monday, there were no significant macroeconomic releases in either country, but market participants were still active. We anticipate the pound could reach the target level we outlined for 2024: 1.1800.

5M Chart of GBP/USD

On the 5-minute timeframe on Monday, several trading signals were generated. Overnight, the price broke through the range of 1.2164 to 1.2170. During the European trading session, it bounced back from this level and dropped to 1.2107. In the American session, it rebounded again from 1.2107 and managed to break above the 1.2164 to 1.2170 range. Overnight, it reached a high of 1.2235 before pulling back.

It's evident that many traders were asleep during the overnight session, which made it difficult to act on the final sell signal. However, throughout the day, novice traders could have opened short positions followed by long positions, with all these trades resulting in good profits.

Trading Strategy for Tuesday:

On the hourly timeframe, the GBP/USD pair continues to form a downtrend, with the pound declining almost daily. In the medium term, we firmly believe that further declines toward the 1.1800 level are the most logical scenario. Therefore, we should expect additional downward movement, but as always, trading decisions should be based on technical signals.

On Tuesday, the GBP/USD pair might initiate a new decline after rebounding from the 1.2235 level.

For intraday trading on the 5-minute timeframe, attention can be focused on the following levels: 1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2170, 1.2235, 1.2270, 1.2316, 1.2372-1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, and 1.2791-1.2798. There are no major events or reports scheduled in the UK on Tuesday. In the US, the Producer Price Index will be released, although it is unlikely to significantly impact the dollar's exchange rate.

Core Trading System Rules:

1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
3. Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
5. MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
7. Stop Loss: Set a Stop Loss to breakeven after the price moves 20 pips in the desired direction.

Key Chart Elements:

Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.

Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.

MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.

Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.

Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.