Euro / U.S. DollarEducation
All about the GBPUSD
GBPUSD is one of the most popular and widely traded trading instruments on the Forex market. Due to its high liquidity and high volatility, it provides opportunities for daily or intraday trading. In this article we will look at GBPUSD and give valuable tips for successful trades.
Currency Overview
The British pound is the main currency pair representing the currencies of the two largest economies in the world. The quoted currency is the US dollar, and the base currency is the British pound.
Interesting fact:
Many currency traders refer to the GBPUSD pair as a "cable".
Currencies are seriously affected by economic reports such as GDP, employment reports, inflation, etc. Nevertheless, the activity of the central bank is one of the most important factors of currency volatility and price direction. This applies both to decisions made by the Bank of England and to the units of the Federal Reserve System responsible for interest rate decisions. From a historical point of view, the GBP/USD pair has been trading since the early 1970s, when both the United Kingdom and the United States switched to floating exchange rates.
The best time to trade
The average daily volatility of the cable is large enough to take advantage of short-term price trends.
In addition, the currency pair is very stable and suitable for technical and fundamental traders.
The best time to trade GBP/USD is when the sessions in London and New York overlap. At this time, the maximum trading volume is observed. The spread during this period will be the narrowest, which means the least slippage in trading.
The window for trading between the London and New York sessions is between 8:00 and 12:00 Eastern time. The second best time for trading is the opening time of the London session, that is, the interval from 3:00 to 4:00 Eastern time. Most European markets are trading at this time, so this pair has a large trading volume.
Five economic data affecting the exchange rate:
First of all, these are reports on the GDP of the United Kingdom and the United States. Usually, the initial estimates of GDP have the greatest impact on the price of currency pairs, because they are published earlier, giving traders a preliminary assessment of the economic state of the country.
The second type of reporting is related to monetary policy. In particular, reports and decisions on interest rates published by the Bank of England and the US Federal Reserve System.
Trade balance indicators. As a rule, the trade balance shows how much capital enters the country and how much is withdrawn from it. As a rule, an increase in the trade surplus is considered a sign of a healthy economy, while a trade deficit is considered not such a favorable event.
GBP/USD traders should pay close attention to the unemployment rate in the US and Britain. Essentially, the unemployment rate measures the percentage of the total workforce that is unemployed but currently looking for work.
Obviously, the higher the unemployment rate, the greater the harm to the entire economy.
Inflation indicators. This includes the consumer price index and the producer price index. The consumer price index measures the inflation of a basket of goods and is considered an inflation index at the consumer level. The PPA measures inflation at the producer or wholesale price level. Both inflation indicators provide important information about potential long-term price trends. However, the producer price index is considered a leading indicator and therefore may be more useful for predicting the next price trend.
Correlation
GBPUSD can often move simultaneously with other major currencies, especially the Eurodollar pair, and can often depend on other major currencies in the opposite direction.
The correlation can exist in different time frames, including four hours, eight hours, or the whole day. Moreover, these correlations are dynamic and can change over time.
Trading Strategy
The strategy is called the Big Ben strategy. In fact, this is a strategy for breaking the opening range of a currency pair. The logic of the strategy lies in the change in the volume of volatility, which tries to restore the initial price movement after the Japanese session. In particular, the trading volume of GBP/USD decreases significantly after the end of the New York session, and then during the Asian session.
Therefore, most large institutional traders will not trade before the start of the European session. This usually leads to market fluctuations within the range of the GBP/USD currency pair during the night period. Therefore, when the currency pair begins to increase trading volume at the beginning of the European session, it is possible to trade on breaking the opening range. Given that interbank sellers create a range on both sides of the market during the opening period, a potential exit from the range usually leads to a trend phase at the beginning of the trading session.
Rules for a long entry using a Big Ben set with five-minute candles:
Plot the range of high and low prices between the Frankfurt Open Championship and the London Open Championship. This is defined as the opening range.
The price action during this period should be limited to a range of
Enter the breakout and close above the range extension level by 38%.
The stop loss should be set in the middle of the opening range.
The take profit will be equal to twice the length of the opening range measured from the breakout point.
Rules for short entry using a Big Ben set with five-minute candles.
Plot the high and low price range between the opening in Frankfurt and the opening in London. This is defined as the opening range.
The price action during this period should appear to be limited by a range
Enter the breakout and close below the range extension level by 38%.
The stop loss should be set in the middle of the opening range.
The take profit will be equal to twice the length of the opening range measured from the breakout point.
resume
Now you know what news you need to follow in order to trade GBPUSD profitably.
In addition, you know the best time to trade and even the trading strategy.
GBPUSD is a very volatile pair, with proper trading it can bring you a quick profit.
But do not forget about the risks.
Stick to the strategy!
Good luck!
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩💻
Currency Overview
The British pound is the main currency pair representing the currencies of the two largest economies in the world. The quoted currency is the US dollar, and the base currency is the British pound.
Interesting fact:
Many currency traders refer to the GBPUSD pair as a "cable".
Currencies are seriously affected by economic reports such as GDP, employment reports, inflation, etc. Nevertheless, the activity of the central bank is one of the most important factors of currency volatility and price direction. This applies both to decisions made by the Bank of England and to the units of the Federal Reserve System responsible for interest rate decisions. From a historical point of view, the GBP/USD pair has been trading since the early 1970s, when both the United Kingdom and the United States switched to floating exchange rates.
The best time to trade
The average daily volatility of the cable is large enough to take advantage of short-term price trends.
In addition, the currency pair is very stable and suitable for technical and fundamental traders.
The best time to trade GBP/USD is when the sessions in London and New York overlap. At this time, the maximum trading volume is observed. The spread during this period will be the narrowest, which means the least slippage in trading.
The window for trading between the London and New York sessions is between 8:00 and 12:00 Eastern time. The second best time for trading is the opening time of the London session, that is, the interval from 3:00 to 4:00 Eastern time. Most European markets are trading at this time, so this pair has a large trading volume.
Five economic data affecting the exchange rate:
First of all, these are reports on the GDP of the United Kingdom and the United States. Usually, the initial estimates of GDP have the greatest impact on the price of currency pairs, because they are published earlier, giving traders a preliminary assessment of the economic state of the country.
The second type of reporting is related to monetary policy. In particular, reports and decisions on interest rates published by the Bank of England and the US Federal Reserve System.
Trade balance indicators. As a rule, the trade balance shows how much capital enters the country and how much is withdrawn from it. As a rule, an increase in the trade surplus is considered a sign of a healthy economy, while a trade deficit is considered not such a favorable event.
GBP/USD traders should pay close attention to the unemployment rate in the US and Britain. Essentially, the unemployment rate measures the percentage of the total workforce that is unemployed but currently looking for work.
Obviously, the higher the unemployment rate, the greater the harm to the entire economy.
Inflation indicators. This includes the consumer price index and the producer price index. The consumer price index measures the inflation of a basket of goods and is considered an inflation index at the consumer level. The PPA measures inflation at the producer or wholesale price level. Both inflation indicators provide important information about potential long-term price trends. However, the producer price index is considered a leading indicator and therefore may be more useful for predicting the next price trend.
Correlation
GBPUSD can often move simultaneously with other major currencies, especially the Eurodollar pair, and can often depend on other major currencies in the opposite direction.
The correlation can exist in different time frames, including four hours, eight hours, or the whole day. Moreover, these correlations are dynamic and can change over time.
Trading Strategy
The strategy is called the Big Ben strategy. In fact, this is a strategy for breaking the opening range of a currency pair. The logic of the strategy lies in the change in the volume of volatility, which tries to restore the initial price movement after the Japanese session. In particular, the trading volume of GBP/USD decreases significantly after the end of the New York session, and then during the Asian session.
Therefore, most large institutional traders will not trade before the start of the European session. This usually leads to market fluctuations within the range of the GBP/USD currency pair during the night period. Therefore, when the currency pair begins to increase trading volume at the beginning of the European session, it is possible to trade on breaking the opening range. Given that interbank sellers create a range on both sides of the market during the opening period, a potential exit from the range usually leads to a trend phase at the beginning of the trading session.
Rules for a long entry using a Big Ben set with five-minute candles:
Plot the range of high and low prices between the Frankfurt Open Championship and the London Open Championship. This is defined as the opening range.
The price action during this period should be limited to a range of
Enter the breakout and close above the range extension level by 38%.
The stop loss should be set in the middle of the opening range.
The take profit will be equal to twice the length of the opening range measured from the breakout point.
Rules for short entry using a Big Ben set with five-minute candles.
Plot the high and low price range between the opening in Frankfurt and the opening in London. This is defined as the opening range.
The price action during this period should appear to be limited by a range
Enter the breakout and close below the range extension level by 38%.
The stop loss should be set in the middle of the opening range.
The take profit will be equal to twice the length of the opening range measured from the breakout point.
resume
Now you know what news you need to follow in order to trade GBPUSD profitably.
In addition, you know the best time to trade and even the trading strategy.
GBPUSD is a very volatile pair, with proper trading it can bring you a quick profit.
But do not forget about the risks.
Stick to the strategy!
Good luck!
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩💻
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