GBP/USD - characteristics and features of the currency pair Great Britain Pound US Dollar – trading in South Africa

What are currency pairs? 

Currency pairs are the main trading tools representing the ratio of two national currencies in the Forex market. Any currency pair consists of a base currency, which stands first, and a quote currency. The base currency is the currency that is sold or bought against the second currency in the pair. Currency pairs are denoted by the names of the currencies they contain.

What is a currency pair? For example, in a EUR/USD currency pair, the European currency is a commodity, and the American dollar is money. Thus, the value of a currency pair at a given moment in time indicates how much you have to offer for one Euro. All other pairs are considered in the same way.

The most liquid and the most important are currency pairs with the U.S. dollar, as three-quarters of all deals are made with these instruments. Currency pairs without the U.S. dollar are called cross rates. Large bid-ask spreads characterise them because in these currency pairs, firstly, the first currency is converted into dollars and then the dollars into the second currency.

GBP / USD chart
GBP / USD chart

Major currency pairs

Foreign currencies are always traded in pairs - the value of one currency is compared to the value of the other. 

One type of currency pair is the currency pair-major, which is the ratio of the US dollar to each of the six other major currencies: the Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. Also included in this category is the New Zealand dollar. 

In addition, the following seven currency pairs are the most widely traded and most actively used in the global currency markets:

  • EUR/USD;
  • GBP/USD;
  • USD/JPY;
  • USD/CHF;
  • AUD/USD;
  • USD/CAD;
  • NZD/USD.

Of these pairs, EUR/USD and GBPUSD are by far the most traded. 

Choose a currency pair, start earning!
Choose a currency pair, start earning!

How to use currency pairs?

Traders keep track of various factors affecting currency prices, including economic announcements, geopolitical events, and global weather. In doing so, traders seek to determine which currencies they should buy or sell at any given time. Major currency pairs tend to be the most volatile and are therefore the most commonly traded.

Trading sessions

A trading session is a period during which banks and trading platforms of one or more countries located in the same geographical area actively trade on the foreign exchange market, thereby determining the price fluctuations of world currencies, the difference in which can be earned. 

There is no strict timetable for trading sessions in the Forex market. The currency market is accessible for traders all over the world 24 hours a day. How is it possible, and why forex trading sessions are not strictly time-bound? There are many time zones across the globe. While the banks and traders are closing in one country, in another country at the other end of the world, a trading session is just beginning.

That is why any trader can work on the currency market 24 hours a day, seven days a week. The exceptions are weekends, Saturdays and Sundays, as well as some public holidays. 

You have to be aware of what trading session you are trading to get a good idea of how to trade to use different strategies. Depending on the session, the trend moves down or up, and much financial news differently affects other markets.

Information about the GBP / USD currency pair
Information about the GBP / USD currency pair

Trading time frames 

A timeframe in trading is when quotes are grouped and elements of a price chart are arranged (candlesticks, bars, lines, etc.). 

If experienced traders are good at navigating in this variety, it is not so easy for beginners. They often get lost and do not know which time intervals to choose and why they are needed. 

The main danger that awaits beginners - you cannot treat a selection of timeframe on the exchange as a magic pill, which must bring a lot of profit at once. This doesn't seem right. 

You have to try different timeframes. But the idea is to find a trading style, which suits you comfortably and fits your personality and temperament. You can't get hung up on just one or two timeframes. Otherwise, you'll miss out on big chunks of pretty valuable information.

GBP / USD trading conditions
GBP / USD trading conditions

Types of timeframes for beginners

All traders can be divided into several groups according to their comfort and convenience:

  • scalpers;
  • daytraders;
  • short term traders;
  • long term traders.
  1. Scalpers.
    Because they have to work fast, they try to take up to 15 points in each deal (M1-M5), close the position, and search for new opportunities. Therefore, they are interested in shallow timeframes of up to 5 minutes, within which there are many patterns with minimal risk.

  2. Day Traders.
    They seldom leave positions till the next day, as they aim to cover the daily movement and work in the range of M5 to H1. With the high technicality of inputs, they have an excellent profit-loss ratio.

  3. Short term Deals.
    They are focused on terms from 1 day to 1 week, during which they hold their positions. Most often, they analyze the daily and hourly timeframes (H1 - D1). They use stops with longer timeframes, which brings them more profit.

  4. Long term Investors.
    In other words, investors. They are not interested in immediate profits. They think globally and trade long term, hoping for huge profits. So they analyze the higher time frames (D1 - W.N.) and set stops up to 100 - 200 points.

These groups are very relative because even if you are a day trader, it does not mean you have to give up analyzing higher time frames forever. Who knows when you might decide to move to another category? By doing so, you will grow and rise and build up your turnover.

Economic events
Economic events

Why do you need different timeframes?

Analysis of the older timeframe helps you understand the general market backdrop and the intentions of your big rivals. 

So, averages are needed to identify reversal points and confirm conclusions made on the older timeframes. An analysis of the lower timeframes will give you the ideal entry points with the minimum stops. 

An iron rule for every trader, but especially for beginners, starts at the highs and ends at the lows. And never vice versa, otherwise you will cause a lot of problems. Moreover, the noise of lower time frames disturbs beginners who do not understand the essential background.

Technical analysis of a currency pair
Technical analysis of a currency pair

How to choose a timeframe?

  • Deposit size. With a small starting capital, you will not be able to trade above the h4 range. The main problem is a significant discrepancy between the S.L. size and MM rules.
  • Time costs. If you combine trading with your main job, you will not be able to spend more than 2 hours a day in the terminal.
  • Type of trading or indicator system. Each trading strategy has its own recommended timeframe.

Pros and cons of small timeframes

Advocates of small timeframes like them for their more intensive trading and allegedly higher profits, highly debatable. Judge for yourself:

  • You spend almost the whole day in front of the monitor.
  • The more intensive the trade, the more you will be tired, so the probability of making a mistake is higher.
  • The smaller the timeframe, the harder it is to predict the price movement. Candlestick analysis and technical analysis can introduce inaccuracies.
  • Do not confuse scalping and piping. Pipers are trying to trade on the m1 timeframe. They predict almost instantaneous fabulous profit but quickly lose the deposit. So if you want to reach a stable profit, forget about scalping - it is incompatible with stability.

Features of the currency pair GBP/USD 

​​The U.K. economy is one of the most powerful in the world. Therefore, GBP remains one of the most popular currencies on the international financial market. You can make substantial profits by trading this asset. Many Forex traders have the GBP as their favourite asset.

GBP/USD is an abbreviation for the currency pair British pound and US dollar. The currency pair quotation shows how much USD you have to pay to buy 1 British pound. GBP/USD is a trendy trading instrument in Europe and especially in the UK. It is the third most traded currency pair globally, with a daily trading volume of roughly 12% of the total FX market turnover.

To open a deal on this currency pair, you need to click on the chart of this asset in the MT4 terminal and select the appropriate order. Buy or sell can be at the current market price. Users also can place pending orders, which will be triggered when the price reaches a specific limit.

In addition, the use of Stop Loss or Take Profit is highly recommended. These orders will help you to fix Profit in time or prevent the occurrence of excessive losses. However, not all traders like to use Stop Loss. After its triggering, real funds are deducted from the deposit. That is why many traders use the so-called Lock as an alternative.

It is about opening one more deal on the same asset but in the opposite direction. As a result, the loss or profit stops at the current level, and only the Swap difference increases/decreases. 

Choose a strategy for yourself
Choose a strategy for yourself

What affects the GBP/USD exchange rate?

Great Britain is one of the developed countries. Its economy is affected by many factors. These include political tensions, economic problems and many more. The most relevant and important ones are the following:

  1. The relationship between the U.S. and U.K. economies. Both countries are powerful players on the international stage. If the American economy slows down and the British economy gains, the GBP/USD currency pair will show bullish momentum. If the opposite is the case, the opposite will happen.

  2. Monetary policy. The British Central Bank publishes a monthly summary report on monetary policy. It gives a detailed description of the reasons for certain decisions taken by the financial regulator. Particular attention should be paid to interest rates. If they go up, the GBP exchange rate also increases. When the rates go down, the currency goes down.

  3. Political risks. Decisions of the British government and Parliament also carry serious risks. The Brexit situation is a good example. The unexpected result of the referendum caused panic in the markets. As a result, the GBP/USD exchange rate showed a record bearish dynamic. A snap election in the British Parliament also caused the pound to jump.

Some events have a global impact on GBP/USD, while others have only a short-term effect. To keep your finger on the pulse, you might want to keep an eye on the news release dates. The economic calendar can help you do this. You will find all the information you need about important statistical releases, central bank speeches and so on. During the release of some news, there can be volatility surges. In such situations, a trader's profit can reach maximum values.

In the economic calendar, events are marked according to their importance. This greatly facilitates the work of beginning traders. It is worth noting that GBP/USD quotes are influenced not only by the performance of the British economy but also by the U.S. economy. If the U.S. dollar strengthens against all currencies, it will be reflected in the pound.

News about the GBP / USD currency pair
News about the GBP / USD currency pair

Volatility and trading strategy GBP/USD

A high rate of volatility characterizes the British pound. On the one hand, this makes the currency pair GBP/USD very popular, but on the other hand, it produces many conservative traders give it up when trading.

Anyway, your trading strategy should consider the high volatility of the pound. In some cases, it will be proper to reduce the lot size used in trading or expand the Stop Loss limits.

Registrating on the investing platform
Registrating on the investing platform

How to start trade GBP/USD in South Africa?

Getting started in currency pair trading is a great way to start your trading career. All you need to do is register on the platform. Of course, registration is quick and easy.  You provide some personal information, and the site can identify you from that information. 

Demo account

Having a demo account is a great way to test your trading strategy without losing money. It gives you a huge advantage and a chance to gain invaluable experience. 

How to open demo account
How to open demo account

Real account

Once you have practised on the demo account, you can open a real account. First, you need to make a minimum deposit. A real account is a whole other level. 

Trading is all about risk and chance. Trading is the choice of the brave, intelligent and willing to change their lives. Always learn, improve your knowledge, follow the market news, and you will be successful!

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