About 15% of all Forex transactions are made on the GBP/USD pair. And for good reason. The UK is one of the world's leading emerging economies. After Brexit, the pound has grown significantly and the currency is starting to gain in popularity. Let's take a look at the basic trading nuances to expand your trading portfolio and increase your profit potential.
What Affects the Pound Rate
When trading GBP, using purely technical analysis may not be enough. The pound is actively responding to economic and political changes in the country. What you should pay attention to:
- Bank of England decisions. Monetary policy has the highest impact on the GBP rate. When the interest rate rises, the pound rate strengthens significantly. When the rate falls, the GBP drops in value.
- Inflation, unemployment and employment rates.
- Trade balance.
- Quarterly GDP indicators.
- Data from the real estate market.
Most of this information is published at the opening of the European session.
In addition, it is worth remembering the correlation of instruments. The British pound reacts not only to economic indicators but also to changes in oil and other energy resources prices. Before entering a trade, it is worth checking their value
GBP/USD Trading
You can choose any pound instrument, however, you should probably start with the most popular one. The GBP/USD pair will make it easier for you to learn how to trade the new currency. Due to the popularity of the instrument, you will find many free strategy tips, forecasts and signals to help you get started. Once you are comfortable with GBP/USD trading, you can expand your portfolio with other pound pairs.
There’s a reason why the pound/dollar instrument is so popular. This pair has high liquidity and volatility which gives you the chance to make high profits on a daily basis.
GBP/USD passes up to 130 pips per day. This makes the pair very popular with scalpers. They open 100 trades a day, making a small profit each time. However, the total earnings are quite significant. Surely it is the popularity among scalpers that makes this pair so unpredictable and profitable.
If you trade the GBP/USD pair, there are a few important points to keep in mind:
- The main trading falls on the European and American sessions. Try to avoid trading during the Asian session when the volatility and liquidity are really low. The potential profit will hardly cover the cost of trading.
- It is worth tracking news not only for the pound but also for the US dollar. When trading the GBP/USD pair, the economic calendar should become your irreplaceable assistant.
- This currency pair is distinguished by a large number of price level breakouts. Many of them turn out to be false. After the breakout, it is better to wait for confirmation of the price movement in the desired direction.
Trading GBP/USD can take your trading career to the next level. However, it works better for experienced traders, since the high volatility and unpredictability of this currency pair may be too difficult for a beginner. If you are dreaming of high profits, start with a more proven instrument - EUR/USD. The pound will become your next big step.