Monday's Trade Review:

1H Chart of the GBP/USD Pair

The GBP/USD pair also tried to continue rising on Monday, but it pulled back in the second half of the day. Overall, the British pound retains an upward trend on the hourly timeframe, so the moves we have seen in recent weeks are completely natural. Yesterday, the rise in the British currency could have been halted by the US manufacturing business activity index, which came in higher than forecast. However, that single index will not change the overall market mood. The pound continues to move much more technically and predictably than the euro, which remains at the bottom with little chance of revival. Traders are still awaiting the Bank of England's first monetary tightening in several years, which may be announced on Thursday, as well as the results of the US congressional elections, where Democrats could achieve a decisive victory. As a result, the week promises to be interesting and volatile.

5M Chart of the GBP/USD Pair

On the 5-minute timeframe on Monday, a strong buy signal formed, but during the European session traders fell just short of the nearest target area of 1.3456–1.3476. By the end of the day, pound quotes fell, but novice traders could still close the long position with a small profit.

How to Trade on Tuesday:

On the hourly timeframe, the GBP/USD pair continues to form an upward trend. The pound trades more logically than the euro overall, so it has a good chance of continuing the uptrend. The technical picture on almost all charts supports the pound's rise. The fundamental background and the dollar's overbought state also support GBP/USD's advance.

On Tuesday, novice traders may consider short positions targeting 1.3319–1.3331 if price consolidates below the 1.3380–1.3386 area. Open long positions with a target of 1.3456–1.3476 if price bounces again from the 1.3380–1.3386 zone.

On the 5-minute timeframe you can trade the levels 1.3043, 1.3096–1.3107, 1.3175–1.3180, 1.3259–1.3267, 1.3319–1.3331, 1.3380–1.3386, 1.3456–1.3476, 1.3587–1.3598, 1.3631–1.3641. On Tuesday, no major events or releases are scheduled in the UK, and in the US, the first labor-market report of the week — JOLTS — will be published. However, we do not expect the market to react strongly to that report, as more significant global events lie ahead.

Main rules of the trading system:

1. Signal strength is judged by how long the signal took to form (a bounce or a breakout). The less time required, the stronger the signal.
2. If two or more false signals have been generated around a given level, all subsequent signals from that level should be ignored.
3. In a flat (range), any pair can produce many false signals or none at all. Technical levels can be ignored.
4. On the hourly timeframe, ideally trade MACD signals only when volatility is strong, and a trendline or trend channel confirms the trend.
5. If two levels are placed very close to each other (5–20 pips), treat them as a support/resistance area.
6. After a price moves 15 pips in the intended direction, move the Stop Loss to breakeven.

What is shown on the charts:

Price levels (areas) of support and resistance — levels that serve as targets when opening longs or shorts or as sources of signals.

Red lines — channels or trendlines that display the current trend and indicate the preferred trading direction.

MACD indicator (14,22,3) — histogram and signal line — an auxiliary indicator that can also be used as a source of signals.

Important speeches and reports (listed in the news calendar) can strongly affect a currency pair's movement. Therefore, when they are released, one should trade as cautiously as possible or step aside to avoid a sudden price reversal against the prior direction.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and money-management rules is the key to long-term success in trading.