Now that you know the basics of how to trade support and resistance, it’s time to apply these basic but extremely useful technical tools in your trading. Because here at BabyPips.com we want to make things easy to understand, we have divided how to trade support and resistance levels into two simple ideas: the Bounce and the Break. The…
As we said earlier, in order for someone to invest in a particular stock market, one would need the local currency in order to purchase stocks. You can imagine the effect that stock markets like the DAX (that’s the German stock market), have on currencies. In theory, whenever the DAX rises, we can probably…
If we take this trend line theory one step further and draw a parallel line at the same angle of the uptrend or downtrend, we will have created a “channel”. No, we’re not talking about ESPN, National Geographic Channel, or Cartoon Network. These channels aren’t television channels, they’re trend channels, sometimes also called price channels. Still, this…
Let’s see how the forex market can affect the stock market, specifically stock indexes. When people talk about the stock market, you generally hear them using a stock market index in reference to the market’s performance. A stock market index is simply a curated basket of certain stocks. This list of stocks is a way to get a…
Trend lines are probably the most common form of technical analysis in forex trading. They are probably one of the most underutilized ones as well. If drawn correctly, they can be as accurate as any other method. Unfortunately, most forex traders don’t draw them correctly or try to make the line fit the market instead of the other…
One issue with using global equity markets to make forex trading decisions is figuring out which leads which. It’s like answering that age-old question, “Which came first, the chicken or the egg?” or “Who’s yo daddy?!” Are the equity markets calling the shots? Or is it the forex market that wears the pants in the relationship? …
“Support and resistance” is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea of how you should measure support and resistance. Let’s take a look at the basics first. Look at the diagram above. As you can see, this zigzag pattern is making its way up (a…
Did you know that equity markets can also be used to help gauge currency movement? In a way, you can use the equity indices as some kind of a forex crystal ball. Based on what you see on the television, what you hear on the radio, and what you read in the newspaper, it seems that…
A quick recap: So far, we’ve discussed how differences in rates of return can serve as an indicator of currency price movement. As the bond spread or interest rate differential between two economies increases, the currency with the higher bond yield or interest rate generally appreciates against the other. Fixed income securities (including bonds) are…
The bond spread represents the difference between two countries’ bond yields. These differences give rise to carry trade, which we discussed in a previous lesson. By monitoring bond spreads and expectations for interest rate changes, you will have an idea of where currency pairs are headed. Here’s what we mean: As the bond spread between two economies widens,…