I received an interesting email yesterday from a self-confessed forex newbie asking how the average trader could have predicted the big move in the GBP/USD this week, so here are my views.

The first thing I would say is that successful forex trading is not about making predictions. You should never try and guess or predict where the market will go. Instead you should focus on finding positions (using technical analysis) where there is a high probability that the market will move in your favour.

I should point out that I didn't actually trade the GBP/USD pair or indeed any forex pairs this week due to family issues, so cannot speak from experience this time round, but looking at the charts this week it would appear that there were a few ways you could have caught some of the big 500 point move that took place between Wednesday and Friday.

For a start the the EMA (5) crossed the EMA (20) on the daily charts last month and has been trading above it ever since so we were clearly in an uptrend and therefore should only have been looking for long positions on the 4 hour charts.

Looking at the chart above there were two good indications that we were about to head higher.

Firstly you can see that on Wednesday the price dropped significantly, testing both the EMA (100) and EMA (200), indicated by the red and pink lines respectively. You will notice that the EMA (200) in particular acted as a nice support level and the price bounced nicely off of this level at around 19725 so this was a very bullish sign.

(You will also notice that it bounced off the bullish Supertrend level, which is another indicator I use, indicated by the thick green line, so a change in trend was averted).

Secondly, if you're an EMA crossover trader like myself you will see that the EMA (5) crossed upwards through the EMA (20) on two occasions this week. The first one petered out fairly quickly and if I had been trading I would have been stopped out at breakeven or for a small loss, but the second move would have yielded some outstanding profits if held until it's conclusion. It also would have been backed up by the fact that it crossed through the parabolic SAR which is always a very bullish sign.

There were also MACD and TRIX crossovers during the upwards move (not included on the chart above) so these are just a few of the ways you could have anticipated the upwards move this week, to answer the original email.

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