When you’re building a list of forex pairs to target through a swing trading strategy, there are a few basic characteristics you want to prioritize to identify the strongest trading opportunities possible. Any currency pair is going to offer price movements that create swing trading potential over time, but if you’re serious about swing trading, you want to limit your focus to the pairs that offer the highest profit potential through this trading strategy.
In general, the best forex pairs to trade for swing trading are going to offer excellent liquidity and enough volatility to create price movements that lead to swing trading opportunities—but not so much volatility that it’s hard to predict how the price movements and trajectories will play out over time. Additionally, the volatility needs to generate price movements over a relatively short period of time—somewhere between days and weeks.
Although it’s not as aggressive as scalping or day trading, swing trading is still best done within shorter time frames that allow traders to capture profits quickly. The longer you have to wait to realize a profit, the less lucrative this strategy will be over time.
The Advantages and Disadvantages of Swing Trading
While swing trading offers some great advantages that may be preferable over day trading and other trading strategies you might consider, swing trading also brings its own risks and restrictions, so traders should approach this strategy with caution as they acclimate to its dynamics.
That said, the benefits of swing trading are significant depending on your trading goals. In most cases, swing trading requires less of a time commitment than day trading, which can be preferable to traders balancing forex trading alongside other activities. In most cases, swing trading only involves the use of technical analysis, which simplifies your trading research and contributes to the reduced time commitment of forex trading.
Swing trading also maximizes your quick profit opportunities by seeking out market swings rather than focusing on the long game. But with that fast profit potential comes an increased risk if trades turn the other way. A fast reversal rather than a price swing in your favor can quickly pile up losses for your trading account.
Swing trading is also more liable to overnight and weekend market risk, especially in cases where you’re holding a position but unable to monitor price movements. And, despite the profit potential that swing trading offers in theory, it isn’t guaranteed to be more lucrative than trading strategies focused on long-term trends.
Six Best Forex Pairs to Trade for Swing Trading
With that said, here are six of the best forex pairs to start following in your swing trading strategy:
As one of the larger, more stable currency pairs, EUR/USD doesn’t provide enough volatility to offer value to most day traders. But for swing traders, there’s potential to turn a profit over a multiday or multiweek position. And although the volatility isn’t ideal, the high liquidity of the EUR/USD forex pair lends itself well to swing trading, especially for beginners looking for straightforward forex pairs to cut their teeth on.
Known as a major commodity forex pair, NZD/USD is one of the best forex pairs to trade for swing trading because its price swings are often correlated to movement in a commodity market. In the case of NZD/USD, that market is dairy. New Zealand is a top five global exporter of dairy, and the combination of this market influence with the high liquidity and volatility of this forex pair makes it a great option for swing traders to follow.
As a major currency pair, EUR/JPY offers high liquidity that appeals to swing traders. But it’s also heavily influenced by broad market trends and sentiments. Current economic events in either Europe or Japan can have a direct impact on this forex pair, creating reliable technical indicators that swing traders can use to turn a profit.
Like NZD/USD, USD/CAD is considered a commodity pairing based on the large role oil plays in Canada’s gross domestic product as well as America’s heavy consumption of this commodity. As a result, USD/CAD often moves in correlation with the oil market, which can facilitate an easier evaluation of whether it’s one of the best forex pairs to trade for swing trading at any given time.
The third and final major commodity forex pairing, AUD/USD is heavily influenced by the precious metals and other exports leaving Australia and the international market for those commodities. Because of its strong economic relationship with China, the AUD/USD pairing is great for trading on the fluctuations in the Asian and American markets. This pairing also offers high liquidity, which will attract swing traders who are eager to capture quick profits.
Although EUR/CHF typically offers low volatility—which makes it an unattractive option for short-term traders such as scalpers and day traders—it does offer just enough volatility combined with high liquidity to make it an attractive option for swing trading strategies. The pair’s long trend movements serve as one of the great advantages of swing trading EUR/CHF, allowing traders to use technical indicators to identify opportunities early in their development. This gives swing traders an opportunity to maximize their profits by opening a position and riding the price gain or loss for the bulk of this long trajectory.
Top Technical Indicators for Forex Swing Trading
Looking for the right indicators to strengthen your trading strategy and identify lucrative forex opportunities? Some of the most popular indicators for swing trading include:
- Relative Strength Index (RSI): As a simple momentum tool for identifying overbought or oversold conditions, RSI is an easy-to-read indicator that can help pinpoint currency pairs primed for a price reversal.
- Bollinger Bands: Prices that approach or cross outside of these two outer bands historically face a strong likelihood of a reversal in the near future.
- Moving Averages: From simple moving averages to moving average convergence divergence, moving averages are best used to confirm a trend that you believe is likely to precede a strong price movement.
- Stochastic Oscillator: Like RSI, stochastic uses a 0 to 100 scale to identify overbought and oversold conditions that may signal an impending price reversal. Stochastic uses different data points to make this calculation, though, so it can be valuable in confirming the data offered by RSI and other indicators.
- Volume: When trying to gauge the string of a price swing, volume is a simple but effective tool. In general, a higher volume suggests a stronger trend.
As you get started with forex swing trading, it’s important to watch a wide range of pairs so you can identify the best opportunities. If you limit yourself to monitoring only a few swing trading options, you’re likely to miss out on high-value trading opportunities. Swing trading is most successful when you keep your options broad and use technical analysis to identify the best price swing potential at any given time, so use the above forex pairs as a starting point for building out your watch list.
The more pairs you’re able to monitor, the more successful your swing trading strategy will likely become over time.
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