GBP/AUD Trading Tutorial

The GBP to AUD pair trading is highly ranked in today’s forex market, with both included in the top four most traded currencies globally. First of all, it has a massive day-to-day trading quantity, with a daily average of 187,473 trades. This result does not come as a surprise as the currencies are home to two of the world’s biggest economies. Hence, the GBP-AUD currency pair is very popular among new and old-established traders alike.

But how do you start trading this formidable pair? Before we delve into the topic, it’s important to learn more about how the British Pound and Australian Dollar came to be, which started with decimalization in 1971.

GBP-AUD Background 

GBP 

The Great Britain Pound, commonly known as the British Pound (GBP), is the official currency of the UK. Certain factors affect the value of this currency, the topmost being its economic performance. This economic factor is influenced by the GDP (Gross Domestic Product).

Other monetary policies also impact the British pound sterling, especially when the Bank of England considers inflation, during which the interest rates of GBP would rise. As a result, it becomes a deciding factor in GBP-AUD pairing and analysis.

AUD

Likewise, the AUD has a couple of trade-influencing factors as they are both affected by economic and political policies. However, a more crucial factor comes from the import/export sectors for the Australian dollar.

As with the GBP, traders and investors use economic reports to predict and determine the price value of the AUD. Other determinant factors of the financial strength include low-interest rates on government debt. Ultimately though, the value of the AUD currency lies with the Reserve Bank of Australia.

A Guide To Trading The GBP-AUD Pair

Generally, there are two ways to trade GBP to AUD. One is through forex contracts, and the other is CFDs. 

A CFD, or Contract For Difference, is a financial agreement made between an investor and a broker where one pays another the difference in outcome value of a trade. This difference in value is paid at the beginning and closing of a business transaction.

There could be an instance where you choose to speculate an upturn in the price of a pair (holding a long position) or a falling price (holding a short position). Since everything happens within a limited time range, it is considered a short-term investment. As such, we say you are trading as CFDs.

How to Trade GBP-AUD using a Short Position (weekly forecast)

If you hope to be a successful forex trader, consider some things. Below are practical steps for GBP-AUD trading by holding a short position.

Consider the timeframe

Forecasting an exchange rate relies on the timeframe of your trade. In other words, short and long position indicators may co-exist.

So, the first step here when you need to forecast is to consider the timeframe. Your GBP-AUD rate is relatively stable in timeframes involving hours up to weeks. Only a few factors can rock that stability. As a result, you get to focus more on your next trading strategy.

Check economic calendars

As earlier discussed, certain economic and political events affect currencies. By checking these calendars, you stay up-to-date with the latest trends.

There are countless free financial journals out there. Hence, it is crucial to seek the best possible economic calendars. Preferably, they grade data in low, medium, and high importance levels.

You might want to skip the ones of medium and low importance, though. The main deal is in the high-impact events. This way, you can handle any of the risk factors. In addition, you will likely spot an excellent GBP-AUD exchange rate along the way.

Convert your money before a risk event

Currency brokers are naturally cautious of risks. It is only wise to play it safe if an upcoming event does not seem to favor you. So if you suspect a negative direction in the GBP-AUD rate, it’s better to convert right away.

Apply a technical analysis

This analysis is a widely-used technique for GBP-AUD forecasting. The technical analysis uses a pattern of prices to identify and predict the trends in future rates. Effectively, you foresee the possible outcome of a GBP-AUD forex trade before it happens.

Some websites offer technical analysis features; you need to choose a timeframe. Afterward, the analysis will propose a buy when GBP will rise. Otherwise, you are left with a sell option if the Pound falls.

How to Trade GBP-AUD using a Long Position (yearly forecast)

Using this forex trading forecast technique requires a different method from the short term. There’s just a lot more occurring in the economic sphere that affects the GBP-AUD currency pair.

Do Not Wait before Buying or Selling

With the extended time factor, you may want to wait for a suitable period to exchange. However, the best technique is not waiting. That’s because the GBP rises and falls, like any other currency.

Study historical rates

There is no surer way to predict the outcome of a GBP-AUD rate than to reference historical points. They help guide your bidding timing.

So, it would help if you studied a GBP-AUD rate chart for a better trading perspective. Analyzing it over five years is ideal. Identifying the troughs and peaks in the graph shows you the underlying trends in a lucid view.

Seek assistance from a Forex expert broker

As a trader, you could always use some expert knowledge. You’ll find it online or from someone who watches foreign exchange rates all day.

Proven Strategies For A Successful GBP-AUD Trading

There is undoubtedly an enormous potential in the forex marketplace as a whole. Therefore, joining this market with the right trading strategies is key. While it is now more competitive and complex than ever, it remains a high profit-spinning venture, especially among day traders.

To achieve and maintain a high-success trading rate, you need to apply a good trading formula. However, your choice depends on your ambition, experience level, and currency pair.

We are providing you with various ways to trade your GBP-AUD pair. This outline contains time-tested and proven strategies, their best usable times alongside the pros and cons.

Play it Simple and Reduce Risks with Trend Trending

This trading strategy is among the top and most reliable ones around. Aptly named, it banks on your accurate prediction of the future price of GBP-AUD based on recent trend data. 

To succeed, you need to identify a few simple things first. These include the trend’s overarching direction, its strength, and duration. Applying this strategy aids you in securing your profits while minimizing losses.

In general, trend trading yields relatively more profits in the long run, especially if you sustain the overarching trend.

When to use this strategy

This strategy helps traders determine the strength and direction of the currency trend. With these trend indicators, you can monitor the present GBP-AUD market chart. Some of these indicators are the MACD and ADX.

In summary, you will cash in on overbought and oversold levels of a GBP-AUD trade.

Pros

  • Trend trading shields you from unwanted risks.
  • It requires simple knowledge of only current situations.
  • The method guarantees consistent and reliable results.

Cons

  • It demands patience.
  • With fluctuating trends, it needs close monitoring before entering a new position.

Apply Position Trading to Overcome Short-term Market fluctuations

This trading strategy caters to traders holding their positions for an extended period. The timeframe could be anywhere between a few weeks up to years.

Over the long term, position trading offers traders a larger market view. Therefore, they can manage small fluctuations in the GBP-AUD market opposing their position.

When to use this strategy

The position and trend trading strategies work hand-in-hand. They both depend on functional data analysis. You hold a long-term position while expecting a rise in the currency’s value. Therefore, position trading is handy when considering entering or exiting a trade. That way, you identify macro and microeconomic conditions that shake the value of the GBP-AUD, making a regular profit overall.

Pros​

  • It helps secure regular profit.
  • It also cuts down potential losses.

Cons

  • This strategy requires deep insight into the market.
  • It requires risk management skills.

Keep Track of Events with News Trading

As stated earlier, forex is a global marketplace that operates on changing economic events. For that reason, acquiring the latest financial news update is crucial to successful trading. This way, you are prepared for any breakouts or intraday/multi-day market changes.

When to use this strategy

This strategy can help you deal with even a slight political change or natural disaster that influences the forex market.

Better news trading indicators include the CCI (Consumer Confidence Index) and economic calendars. These will guide you in the direction the currency pair price moves. As such, you should take advantage as soon as there is a breakout.

Pros

  • There is a potential of racking up huge profits.
  • You trade on small breakouts.

Cons

  • It comes with more significant risks
  • There is an increase in the volatility of prices.
  • It requires trading experience to spot the right moments to enter a trade.

Get Consistent and Rewarding Outcomes with Range Trading

This method operates on the principle of resistance and support. You will identify such points on a graph with price actions. Please note that resistance and support are at the lowest and highest price points before they go in opposite directions. Within that threshold, the range is where you trade.

When to use this strategy

Use range trading when opening and closing a GBP-AUD trade and taking a position. To do this, you need indicators such as RSI and the stochastic oscillator. These indicators prime you for an overbought or oversold situation.

Pros

  • There is reduced risk.
  • Trades are often rewarding
  • It guarantees more successful and consistent trades.

Cons

  • It requires a good sense of timing.
  • It also requires patience.

Make Huge Quick Profits with Swing Trading

This next strategy follows trends to capitalize on any sudden price momentum changes. Sometimes, these dips and smaller price surges oppose the current trend direction. As a result, you only have a market outlook limited to minutes, hours up to weeks, at most.

When to use this strategy

You will apply this strategy for short-term trading, especially for a day trader who is used to monitoring price momentum changes. Sometimes, it requires you to hold your position overnight. You may also need to trade over a couple of weeks at once.

Pros

  • There is potential for high profits.
  • It offers protection from substantial losses.
  • It helps to curb the risk of overnight position holding.

Cons

  • There is equally a significant potential risk.
  • It requires close monitoring of market situations.

Use Day Trading to Capitalize on Volatile Market Situations

With changes in demand and supply levels daily, fluctuations occur in the forex market. Therefore, this strategy is for traders who intend to maximize the volatility benefits of intraday prices.

When to use this strategy

It is best for short-term trading. You may utilize indexes and economic calendars to do technical analysis. With this, you understand the movement trend of the currency pair (GBP-AUD) on a particular day. Then, you capitalize on the trend or exit positions depending on when the forex market closes.

Pros

  • It grooms your money management skills.
  • It saves time.

Cons

  • Day trading requires forex experience.
  • It requires keen attention to detail.

Use Scalping for Guaranteed Profits, No Matter How Little

Scalping works closely with intraday trading. Here, you buy and sell GBP-AUD and vice versa. With every trade you make, you intend to carve out minimum profits. You are essentially applying technical analysis on the movement in prices of the currency spread.

Your bid price must climb above the initial opening price to gain a profit. Then, you reverse the currency pair before there is a fluctuation in price.

When to use this strategy

This strategy relies heavily on the currency spread. You will be better off dealing with a market maker to make successful trades. With their help, you can determine GBP-AUD prices during bidding and asking. At the same time, you need to access a lower spread. This strategy becomes handy when you use a platform with low latency.

Pros

  • It guarantees you earn pips, no matter how little.
  • It prompts large volumes of trades to raise profits.

Cons

  • It demands complete focus.
  • Increased volumes of trades increase the complexity.
  • Per trade, there are few chances to make little profits.

Spot Breakouts with Retracement Trading

Take a situation where the Pound or Australian dollar price reverses for a little while. It then continues on the path of the underlying trend. Trading with a technical analysis of this phenomenon is called retracement trading.

It is worth noting that there is a difference between retracement and reversal. In the latter, prices reverse but do not return to the initial trend. Instead, they form a new one. Traders use a Fibonacci ratio method to differentiate the two phenomena.

When to use this strategy

This strategy is applicable when you suspect a temporary price dip or surge. For example, you hold your current position when you feel a possible trend retrace to its initial order. Otherwise, you exit your place and take a new one when you spot a trend reversal instead.

Pros

  • You have Fibonacci retracements that help you position for a trade.
  • It also helps spot potential breakouts.

Cons

  • There is much technical analysis involved.
  • It is trickily similar to reversal trading.

Use Grid Trading to Spot Forming Trends

With this technique, you also take advantage of breakouts. Therefore, it positions you to spot new trends as they form. Grid trading works by creating a network of orders below and above the current GBP-AUD price.

This trading strategy triggers an order with block orders that correspond to any change in the direction of the GBP-AUD prices.

When to use this strategy

To successfully trade with this strategy, you first need to identify resistance (peaks) and support (troughs) levels. You do this by technical analysis or drawing a grid of trend lines on the price graph.

In effect, you keep track of a potential breakout with those grid lines. This strategy is used after the market closes. Then, you set orders for the upcoming market or the next day’s trade.

Pros

  • It does not require prior knowledge of the ongoing market direction.
  • You have more time and freedom.
  • It does not demand quick actions.

Cons

  • It requires careful mapping of grids.
  • An error in triggering profit-taking values exposes you to losses.
  • There is an increased cost for holding multiple open positions.

Maintain a Consistent Trading Strategy

Remember the strategies that suit you best with diversity in trading techniques. They all have their highs and lows. However, following a consistent set of strategies is a strategy in itself.

When to use this strategy

Using a consistent set of strategies depends on your forex trading experience and other circumstances. For example, trend trading is most suitable for beginners. As a beginner, you will eventually get used to technical analysis and taking your time. Alternatively, day trading demands instant action and multiple trade management.

Pros

  • You are likely to get consistent results.
  • You become a professional trader with those methods.

Cons

  • It takes experience and time to identify a strategy suitable for a particular market.
  • Some markets require a flexible strategy.

Conclusion

Regardless of your experience as a GBP-AUD trader or forex expert in general, there is always room for losses. No strategy or trading technique guarantees a 100% success rate.

Nonetheless, following the above tutorial is among the best foreign exchange practices. Other excellent techniques involve good money management and consistency. Overall, keep the odds in your favor at all times by sticking to what works for you.

FAQs

What is Forex?

Forex stands for foreign exchange and involves changing one currency into another.

Why do people trade in Forex?

It happens for two major reasons: Traders speculate the rise and drop of currency prices to make a profit for themselves. On the other hand, companies hedge on locked market prices for international manufacturers and sales.

What is the best forex trading strategy?

Overall, most traders prefer Scalping because it guarantees minimal but sure profits. However, certain criteria determine a very good trading strategy. These criteria include the currency pairs involved, time factor, and profit-making purposes.

Is GBP-AUD a good trading pair?

Yes, it is. This currency pair is among the most popular in the forex market. Much so that newcomers and veterans trade GBP-AUD in large quantities daily.

What is the best time to trade GBP-AUD?

Once again, certain criteria determine a good time to enter a trade. On the whole, trading strategies work best during the narrowing busy periods. The busy periods for GBP trades are anywhere between 8 am to 10 am from Sundays through Fridays in the US.

How many pips does GBP-AUD move per day?

On average, GBP-AUD moves about 180 pips each day, according to 2020 statistics. A very volatile currency, GBP trading requires setting wider stop-loss orders.

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