The GBP/USD is one of the most popular currencies traded in the forex market. It is also one of the oldest tradable currency pairs.
Traders can trade the GBP/USD exchange rate via the spot market or with CFDs. There are several different strategies that traders can use depending on their experience, risk tolerance, and preferred approach to trading.
Price action strategy
A price action strategy is an effective way to trade in any market. Instead of tracking actual events like the release of economic data or central bank interest rate announcements, price action traders use historical prices to determine when to enter and exit trades.
The price action approach is also a popular one among Forex brokers because it works well in all market conditions, including range-bound environments. In addition, price action strategies are incredibly flexible and can be transferred easily to other instruments.
GBP/USD pairs tend to trade with high volatility during stock market operating hours. This is because UK financial news often moves these pairs with as vigor as global news.
CFDs
CFDs are a stylish way of trading forex. They allow you to trade forex pairs, like GBP/USD and EUR/GBP, without owning the underlying asset.
The price of a CFD is determined by the movement of the underlying market, which means you can make profits or losses depending on whether the market moves in your favor or against you. You can profit from a rise in the price (go long), or lose money if the market falls (go short).
CFDs are also famous for hedging share portfolios, providing a means to offset any share market losses you might otherwise incur. For example, if you own BT shares and their price declines by 5% in the underlying market, you can protect your share portfolio by selling PS5,000 BT CFDs.
Breakout trading
Breakout trading is a popular method used by many day traders. This strategy involves looking for stocks confined to trading below a specific level (resistance) or above a particular group (support).
To identify breakouts, traders analyze price charts and technical indicators. They look for trends and patterns, such as triangles, wedges, channels, rectangles, heads and shoulders, and cups and handles.
When a stock breaks out, it typically moves quickly. However, it can also move the other way and return to its original price point. This is called a false breakout and can be costly.
Charting software
Stock charts help investors identify patterns and determine when the best times to buy or sell. In addition, they can be used to determine the value of a portfolio.
A good charting software package will include a range of charts and indicators, back-testing capabilities, and portfolio management tools. It should also be easy to use and understand.
Forex traders often use candlesticks and bar charts to analyze the price of a currency pair over some time. These charts show closing prices, opening prices, high price points, and low price points.
Traders can select interval resolutions that range from seconds to years. They can also choose to display data series in daily, weekly, monthly, or yearly intervals. They can also customize the number of bars that are displayed.
Trading hours
The forex market is one of the most widely traded markets in the world, as it is available 24 hours a day. This is because trading is done over a network of computers instead of physically centralized exchanges.
Generally speaking, trading hours for a specific currency pair will depend on the local market. For example, the AUD/JPY pair tends to be most active when Sydney and Tokyo sessions overlap.
It is also common for currency pairs to experience gaps in their trading sessions. These gaps are usually because of major economic events that affect the value of a particular currency.
If you are a day trader, focus on trading when there is enough volatility to extract a profit and cover spread and commission costs. These times are usually between 0800 to 1000 or 1200 to 1500 GMT.
