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How to Trade the GBP/USD

Reading time: 27 minutes

Did you know the United Kingdom is the fifth largest economy in the world? This is just one of the reasons the British pound is one of the world's largest tradable currencies. With rising global tensions led by the United States, a changing relationship with the European Union and an active central bank in the Bank of England, this is one of the best times in history to learn how to trade GBP/USD.

How to trade GBP/USD

In this article, you will discover how the GBP USD exchange rate works, which factors influence its price, the best trading account for pound/dollar trading and the best GBP/USD technical analysis tools to learn when to buy or sell the currency pair, as well as a GBPUSD trading strategy you can start with right away!

What is the GBPUSD?

GBPUSD is the symbol for the British pound to US dollar exchange rate. The British pound is called the base currency and the US dollar is called the terms currency. The quote of the currency pair shows the number of US dollars needed to buy one British pound.

For example, let's say the GBP/USD exchange rate reads 1.2500.

If buying, the quote shows how many units of the terms currency is needed to buy one unit of the base currency. So, in this example, you need to have 1.25 USD to buy 1 GBP.

If selling, the quote shows how many units of the terms currency you get for selling one unit of the base currency. In the example above, you will receive 1.25 USD when you sell 1 GBP. So how does this work for Forex traders?

How does the GBPUSD work?

When it comes to trading Forex and the British pound to US dollar exchange rate your Forex broker will quote two prices for GBPUSD, such as:

In the GBPUSD quote above, there is a bid price and ask price whose levels will constantly fluctuate. A unit of measurement in the GBPUSD quote is called a pip, which is 0.0001 of the quoted price. If the bid price moves from 1.27366 to 1.27376, this is a one pip move.

The difference between the bid and ask price is called the spread. In the example above the spread is actually less than one pip (1.27366 - 1.27373 = 0.00007, using 0.0001 Forex pip measurement means this is 0.7 pips). The last digit in the quote is used by trading robots for precision pricing.

The spread value is one cost of trading. If you buy at the ask price of 1.27373 and immediately sold without any price movement, you would lose 0.7 pips as you would have sold at the bid price of 1.27366. Therefore, the market needs to go more than 0.7 pips higher before you can close out at the bid price at a profit.

The best spreads on GBPUSD are usually found during the best hours to trade GBPUSD and on certain advanced trading accounts like Admiral.Prime - all of which are discussed further in the article.

Let's take a look at two possible trading scenarios, remembering that the ask price is a trader's buy price and the bid price is a trader's sell price, with an average spread of one pip:

Will GBP rise against USD?

If the trader buys at the ask price of 1.2737 and the GBPUSD quote moved to 1.2757 Bid / 1.2758 Ask, then the trader can exit at the bid price (the sell price) of 1.2757. This means the trader would have made 20 pips profit (1.2737 - 1.2757).

However, if the market went from 1.2737 back down to 1.2717 Bid / 1.2718 Ask, the trader will have lost 20 pips (1.2737 - 1.2717).

Will GBP fall against USD?

Forex traders can also profit from a falling market by initiating a sell, or short trade. For example, let's say the trader sells at 1.2736 and the British pound fell against the US dollar producing a new GBPUSD quote of 1.2715 Bid / 1.2716 Ask.

The trader can exit their trade at the ask price (the buy price) of 1.2716. This means the trader would have made 20 pips profit (1.2736 - 1.2706), as they shorted GBPUSD predicting the market would go lower.

However, if the market went from their entry price of 1.2736 up to 1.2755 Bid / 1.2756 Ask, the trader will have lost 20 pips (1.2736 - 1.2756), as they shorted the currency pair expecting the pound to fall against the US dollar.

The next question for many aspiring traders then is what moves the GBP to USD exchange rate? Many traders believe that if they monitor the different influences on the GBP/USD exchange rate it can help in forecasting whether the currency pair will rise or fall.

If you think the GBP will rise or fall against the USD you can test trading ideas by making the trade on a free demo account! To open your FREE demo account, click the banner below:

Free Forex Demo Trading Account

What Moves the GBP/USD?

As the United Kingdom is such a large trading nation, there are many factors that hich influence the price of GBP/USD. International demand for the British pound, central bank policy, political tensions all plays a big part. Here are a few key fundamental and economic indicators to take into account:

  • The UK and US Economy - International demand for a currency will move toward economies that are strong and growing. Therefore, when the UK economy is looking strong and the US economy is looking weak, this could lead to a rise in the GBPUSD exchange rate.
  • Bank of England (BoE) Policy - The UK's central bank meets once a month to release the Bank of England Monetary Policy Summary report which details the reasons on why the members of the bank have decided to either cut interest rates, increase interest rates or keep them on hold. Typically, a currency will fall on the threat of interest rate cuts and rise on the optimism of rising interest rates.
  • Politics and Government - Political events can cause huge movements in a currency as we saw by the collapse of the British pound to US dollar exchange rate after the UK's vote to leave the EU called Brexit. Government elections and a change in political parties can also have a huge impact on the GBP/USD price.
  • Economic Data - While the above events can affect the long-term trends of the market, there are smaller economic data announcements that influence the GBP USD price in the short-term. These are economic announcements such as retail sales, inflation and employment figures.

Check the GBP/USD Calendar While You Trade

Many short-term traders like to day trade GBPUSD around high-impact news announcements to try and capture the volatility these news items may provide. Longer-term traders also like to track news announcements that can impact GBPUSD to identify any trends in good or bad economic data. You will learn more about GBP/USD trading strategies further down the article.

How do you access an economic calendar so you can know about upcoming, potentially market-moving news announcements? One of the best ways is to use the Premium Analytics feature exclusively for Admiral Markets users.

First, you will need to open a live or demo trading account.

Once you have opened your Admiral Markets account visit the homepage and select Premium Analytics from the Analytics tab, as seen below:

Once logged in, expand the Economic Calendar found on the bottom left. You can use the Advanced Filter option to only list economic news items for the United Kingdom and the United States as these are the most likely to affect GBPUSD.

From here we can view all the upcoming news items that are likely to affect the GBPUSD exchange rate price. Clicking on each of these will give you an explanation on what the news item is at the bottom left as well as what analysts are forecasting for the result. In the bottom right you can also find the latest news on GBPUSD, powered by Dow Jones.

There are also a lot more features in the Premium Analytics and the Admiral Markets homepage that can help you in your trading decisions such as a Fundamental Analysis and Technical Analysis section, along with a Trader's Blog. Now you are armed with some of the most powerful tools in the business, the next step is to make sure you have the right trading account set up.

Once you have your trading account setup, it will allow you to follow the other tips in this article, including following the GBPUSD trading strategy, using technical analysis on the GBPUSD and following the tutorial on how to buy and sell GBP/USD.

What is the Best Trading Account for GBP USD?

Picking the best trading account for GBPUSD trading is a very important decision. With Admiral Markets there are three popular accounts types for trading the British pound US dollar exchange rate. These are:

The Admiral.Markets MT4 Trading Account

The Admiral.Markets MT4 trading account is a popular option for trading GBPUSD on MetaTrader 4 - the world's most popular trading platform. Here are some more details:

  • Minimum deposit: 200 EUR / USD / GBP / CHF
  • Account balance currencies: EUR, GBP, USD, and more
  • Markets available: Currencies including GBPUSD, Indices and Commodities
  • Spreads: GBP/USD minimum spread 0.1 pip, typical spread 1 pip
  • Commissions: Commission free
  • Platforms: MetaTrader 4, MetaTrader Web Trader, MetaTrader Mobile Trading

The Admiral.Prime Trading Account

The Admiral.Prime account is a unique offering for those who want to elevate their trading level on GBPUSD MT4. The account is based on Admiral Markets' own STP technology so traders can trade directly with top-tier liquidity providers. Access to this advanced offering also comes with additional benefits:

  • Minimum deposit: 200 EUR / USD / GBP / CHF
  • Account balance currencies: EUR, GBP, USD and more
  • Markets available: Currencies, including GBPUSD-ECN
  • Spreads: GBP/USD minimum spread 0.1 pip, typical spread 0.6 pips
  • Commissions: GBP/USD 3 USD per 1 lot (100,000 units of currency) per side
  • Platform: MetaTrader 4, MetaTrader Web Trader, MetaTrader Mobile Trading

The Admiral.MT5 Trading Account

The Admiral.MT5 trading account is another popular account type for multi asset class traders. One of the biggest differences is that the range of markets available on MetaTrader 5 is far bigger than that on MT4. There are some additional benefits as described below:

  • Minimum deposit: 200 EUR / USD / GBP / CHF
  • Account balance currencies: EUR, GBP, USD and more
  • Markets available: Currencies, Stock CFDs, Index CFDs, ETF CFDs, Bond CFDs, Cryptocurrency CFDs, Commodity CFDs
  • Spreads: GBP/USD minimum spread 0.1, typical spread 1 pip
  • Commissions: Commission free, apart from Stock and ETF CFDs at 0.01 USD per share with 1 USD minimum
  • Platform: MetaTrader 4, MetaTrader Web Trader, MetaTrader Mobile Trading
  • Market depth: Exclusive to MetaTrader 5, you can view the order book to assess the liquidity of the instrument you are viewing

One of the major differences with the Admiral.Prime account is the fact the spreads start from 0 pips with an additional commission charge per lot, or 100,000 units of currency traded. With this account you can also trade inside the spread value with no requirements on minimum volume (order can start from just 0.01 lot).

The lower cost of spread, lightning fast execution and ability to trade in the interbank market makes this the go-to platform for serious Forex traders.

Admiral Markets users also have access to the exclusive MetaTrader Supreme Edition plugin packed full of advanced and highly useful tools in trading GBPUSD, as the next section shows.

GBPUSD Technical Analysis: Learn when to buy GBP/USD, or sell

So far, you have learnt that the GBPUSD exchange rate moves in pips and the major factors that influence the movement of the currency pair. Now that you also have access to one of the best trading accounts for Forex traders, as listed in the previous section, we can now focus on identifying the best time to trade the GBP/USD before going through how to buy and sell the currency pair in your trading platform.

Let's start by looking at a recent four-hour chart of the GBPUSD:

Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admiral Markets (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

Traders will often use technical analysis to analyse the information on the chart. Essentially, a GBPUSD technical analysis process will involve looking at previous price action patterns and cycles to help determine what could happen next. Often, traders will also use trading indicators to help in their decision-making process of what is happening in the currency pair at the current moment in time and what could happen in the future.

Traders who have downloaded the free Admiral Markets MetaTrader Supreme Edition have an edge in using advanced tools to help with their GBPUSD technical analysis. Here are just a few tools that could prove to be effective:

GBPUSD MetaTrader Supreme Edition Symbol Info Indicator

Source: Admiral Markets MetaTrader 4 Supreme Edition, GBPUSD, H4 - Data range: from Jun 6, 2019, to June 24, 2019, accessed on June 24, 2019, at 10:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.

A powerful GBPUSD indicator is the Admiral Markets Symbol Info indicator which is part. To put this on a chart in MetaTrader, first download the Admiral Markets' MetaTrader Supreme Edition plugin. To learn how to do this, watch the video below:

Once this has been downloaded, open your platform and follow the steps below to gain access to the Admiral Symbol Info indicator:

  1. Select the Trade Navigator window (Ctrl+N) which will open a side window on the left side of the chart.
  2. Find 'Admiral Symbol Info' in the window under Indicators -> Examples.
  3. Select the indicator by dragging and dropping on to the chart.
  4. Select Chart -> Indicators List -> Admiral Symbol Info if you would like to customise any settings.

In the settings above, it has been customised to quickly tell the trader where each of the different timeframes (Weekly, Daily, H4, H1, M30, M15, M5 and M1) are trading relative to a specific indicator. In this instance, they are:

  • EMAs - Exponential Moving Averages
  • MACD - Moving Average Convergence Divergence
  • CCI - Commodity Channel Index

So how can GBPUSD traders use this to their advantage? Well the first line in the Admiral Symbol Info indicator is the EMA20. As it is has a blue circle under each of the timeframes it is saying that price is above its respective 20 period moving average on those timeframes. The only red is the weekly chart which means that price is below the EMA20 on this timeframe.

When a market is trading above the EMA20 it is often seen as a bullish sign. This means that, in this example, the British pound to US dollar exchange rate is bullish on seven different timeframes suggesting the pound is much stronger than the dollar.

The Admiral Symbol Info is very useful in giving the trader quick information on the bullish, or bearishness of GBPUSD on multiple timeframes and across multiple indicators.

GBPUSD MetaTrader Supreme Edition Sentiment Trader Indicator

Source: Admiral Markets MetaTrader 4 Supreme Edition, GBPUSD, H4 - Data range: from Jun 6, 2019, to June 24, 2019, accessed on June 24, 2019, at 10:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.

Another powerful indicator is knowing the market sentiment on GBPUSD, which the Sentiment Trader indicator provides. To put this on the chart, after downloading the Admiral Markets MetaTrader Supreme Edition plugin, follow these steps:

  1. Select the Trade Navigator window (Ctrl+N) which will open a side window on the left side of the chart.
  2. Find 'Sentiment Trader' in the window under Indicators -> Expert Advisors.
  3. Select the indicator by dragging and dropping on to the chart.

In this example, it is showing that the sentiment on GBPUSD is 50% which is to be expected as the time it was taken is when the US session has closed and traders are waiting for Asia markets to open. This value is constantly fluctuating and could swing wildly in high volume trading hours when European and US desks are open, potentially giving the trader an additional edge in the market.

Admiral Markets offers professional traders the ability to significantly enhance their trading experience by boosting the MetaTrader platform with MetaTrader Supreme Edition. Gain access to excellent additional features such as the correlation matrix, the latest real-time market data and insights from professional trading experts and other fantastic tools. Get all of this and much more by clicking the banner below and starting your FREE download!

Trade With MetaTrader Supreme Edition

How to Buy and Sell the GBPUSD

There are multiple ways to buy and sell the GBPUSD using the Admiral Markets MetaTrader platform. Advanced traders may use the 'one click trading' function which - at just one click of a button - a trader can be in a live trade on the GBP/USD. However, to learn how to trade GBPUSD, using orders may be the best place to start.

GBP/USD Live Trading Ticket

Source: Admiral Markets MetaTrader 4 Supreme Edition, GBPUSD, H4 - Data range: from Jun 3, 2019, to June 24, 2019, accessed on June 24, 2019, at 10:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.

Trade GBPUSD with these following steps:

  1. Analyse the market using technical analysis, or the parameters of a trading strategy and determine whether you believe the market will go higher (buying) or go lower (selling).
  2. Right-click, select Trading then New Order. Alternatively, press F9 on your keyboard and a GBPUSD live trading ticket will pop up.
  3. Enter Volume value. This is how many units of currency you want to trade. 1 lot = 100,000 units of currency. The lowest volume value is 0.01 lots.
  4. Enter Stop Loss value. A stop-loss is used to exit the trade at a predetermined price level to minimise losses if the market moves against you.
  5. Enter Take Profit value. A take-profit is used to exit the trade at a predetermined price level to maximise any gains and close out any profit.
  6. Click 'Buy at Market' or 'Sell at Market' depending on which direction you believe the market will go.
  7. You can view, amend or close your live trade through the Terminal window (Ctrl+T) where you will find all your live trades, pending orders and account history.

GBP/USD Volatility and Daily Ranges

As there are many influences on the British pound US dollar exchange rate, the volatility of the currency pair can change significantly over time. GBPUSD volatility is evident through using the Aerage True Range (ATR) indicator.

Source: Admiral Markets MetaTrader 4, GBPUSD, Weekly - Data range: from June 10, 2012, to June 24, 2019, accessed on June 24, 2019, at 11:36 am BST. - Please note: Past performance is not a reliable indicator of future results.

The ATR indicator, as shown by the blue line in the chart above, shows the average range of the last fourteen bars for the timeframe displayed. It is clear to see the average range increasing early on and then peaking in the middle. This coincides with the Brexit announcement which massively increased volatility in the currency pair. The impact of Brexit on GBPUSD was huge.

In fact, at the ATR's peak, the average weekly range for GBPUSD was around 470 pips. The highest ATR reading for 2019 has been 276 pips. A massive reduction in volatility after the initial impact of Brexit on the GBPUSD subsides.

The ATR indicator can also help identify the best hours to trade GBP USD.

The Best Hours to Trade GBP/USD

Source: Admiral Markets MetaTrader 4, GBPUSD, H1 - Data range: from June 3, 2019, to June 24, 2019, accessed on June 24, 2019, at 9:57 pm BST. - Please note: Past performance is not a reliable indicator of future results.

In the hourly chart of the GBPUSD above, the ATR indicator continues to move around from peak to trough. This is because pound/dollar volatility is constantly changing as markets digest news items. However, traders may find the most amount of volatility occurs during major session opening hours and the least amount of volatility outside of these hours.

This is why many traders believe the best hours to trade GBP/USD are during the opening hours of the major market sessions, even though you can trade GBPUSD 24 hours a day, five days a week.

So what are the major session opening hours?

  • European session - 7am to 5pm BST
  • US session - 1pm to 9pm BST
  • Asia session - 12pm - 5am BST

A GBPUSD Trading Strategy Example

There are many popular types of trading strategies to trade GBPUSD. The important part is to keep it simple and follow a process, rather than chasing the outcome you want, which can ultimately lead to building poor trading habits.

In order to keep it simple, let's use some well-known, popular tools to build the beginning of a possible GBPUSD price action trading strategy:

Source: Admiral Markets MetaTrader 4, GBPUSD, H4 - Data range: from May 13, 2019, to June 24, 2019, accessed on June 24, 2019, at 10:10 pm BST. - Please note: Past performance is not a reliable indicator of future results.

The above four-hour chart (H4) of GBP/USD shows a 34-period exponential moving average (34 EMA) plotted on price. To put this on your chart, select the Insert tab at the top of the chart, then Indicators, Trend and Moving Average.

Then in the popup box input a period of 34 and MA method of Exponential and a Style of blue to colour the moving average line.

Moving average indicators are often used as a trend filter to quickly determine who is control of the market, buyers or sellers, thereby giving us a set of rules to start with:

  • Rule 1: Go long when the price is above the 34 EMA.
  • Rule 2: Go short when the price is below the 34 EMA.

Now we have a possible directional bias, how do we time a trade? This is where price action trading becomes useful. There are many patterns that can be used in price action trading, two of the most common candlestick patterns are 'the hammer' and 'shooting star'.

The hammer price action trading pattern, as shown above, is a bullish signal which signifies the failure of sellers to close the market at a new low and buyers surging back into the market, to close near the high.

The shooting star price action trading pattern, as shown above, is the opposite of the hammer pattern. It's a bearish signal which signifies the failure of buyers to close the market at a new high, and sellers surging back into the market, to close near the low.

We can now further elaborate on our rules:

  • Rule 1: Go long when the price is above the 34 EMA and hammer price action pattern is formed.
  • Rule 2: Go short when the price is below the 34 EMA and shooting start price action pattern is formed.

Source: Admiral Markets MetaTrader 4, GBPUSD, H4 - Data range: from May 13, 2019, to June 24, 2019, accessed on June 24, 2019, at 10:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.

The chart above highlights occurrences of both rule one and rule two. In most cases, the market continued to trade in the direction of the moving average and price action pattern suggestion. There will be occasions where your chosen trading rules will be less effective and result in losing trades, as in some of the yellow boxes above. This is why risk management and using a stop loss will prove to be beneficial in the long run.

This strategy has not been tested historically for its effectiveness, it merely serves as a starting point to build upon. Traders can take this one step further by experimenting with different moving average values, learning additional price action patterns in the Admiral Markets Educational library, adjust the timeframes and use the advanced tools from the MetaTrader Supreme Edition plugin.

While a GBPUSD trading strategy can prove to be effective it is also important to understand the bigger picture opportunities as well.

Opportunities on GBP USD Forecast For 2020

2020 could be a historic year for GBPUSD trading with Great Britain finally leaving the European Union. Over the year 2019, the turmoil in the UK government continued with Boris Johnson becoming the successor of Theresa May. Johnson didn't get the Brexit, as promised, finalised, but EU leaders at least agreed on a flexible extension of the Brexit date from October 31, 2019 to the end of January 2020. Depending on the resulting outcome and impact on the UK economy which will naturally affect the monetary policy of the BoE, there should be plenty of opportunities on GBPUSD for the flexible trader looking at the big picture.

Trading the GBPUSD

Source: Admiral Markets MetaTrader 5, GBPUSD, Weekly - Data range: from Oct 1, 2017, to June 24, 2019, accessed on June 24, 2019, at 10:30 pm BST. - Please note: Past performance is not a reliable indicator of future results.

The weekly chart of GBP/USD above shows the currency pair trading currently trading in a regressive mode, correcting most of its losses which occurred over Q2 and Q3 in 2019. But below 1.3350/3400, bears stay in control and only a sustainable break back above 1.3400 would brighten the overall technical picture.

Fundamentally, if the UK political landscape can improve, and certainty can be provided through a clear direction on Brexit, there may be a case on why GBPUSD may rise in the long run. However, if the situation worsens, forcing the BoE to aggressively loosen monetary policy, a drop below 1.2000 with a minimum target around 1.1500 could be likely.

Why trade GBP/USD with Admiral Markets?

If you trade the dollar-pound Forex pair with Admiral Markets, you can:

  • Trade 24 hours a day, five days a week.
  • Use leverage of up to 1:500 for Professional clients and up to 1:30 for Retail clients.
  • Trade with a well-established, highly regulated company including regulation from the highly respected UK's Financial Conduct Authority.
  • Access the fastest and most secure trading platforms from MetaTrader on desktop, web or mobile.
  • Trade with institutional grade spreads as low as 0 pips with Admiral.Prime and connect directly with tier one liquidity providers.
  • Access the Admiral Markets MetaTrader Supreme Edition plugin for advanced trading tools such as the Sentiment Trader and Advanced Order functionality completely free!
  • Benefit from our negative balance protection policy for peace of mind.

If you're feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that Admiral Markets provides the ability to trade with Forex and CFDs on up to 80+ currencies, with the latest market updates and technical analysis provided for FREE! Click the banner below to open your live account today!

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