
When making a list of forex pairs to trade with a swing trading strategy, there are a few basic traits you should give the most weight to so you can find the best trading opportunities. Over time, the price of any currency pair will change in a way that makes swing trading possible. However, if you’re serious about swing trading, you should focus on the pairs that have the most profit potential with this trading strategy.
In general, the best forex pairs to trade for swing trading will have good 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. Also, the volatility needs to cause price changes over a short period of time, between a few days and a few weeks.
Even though swing trading isn’t as risky as scalping or day trading, it’s best done in shorter time frames that let traders make money quickly. The less profitable this strategy will be over time, the longer you have to wait to make money.
What are the pros and cons of swing trading?
- Even though swing trading has some great benefits that may make it better than day trading and other trading strategies, it also has its own risks and limits, so traders should be careful with this strategy until they get used to how it works.
- Still, there are a lot of good things about swing trading, depending on your trading goals. Most of the time, swing trading takes less time than day trading, which can be better for traders who are trying to balance forex trading with other things. Most of the time, you only need to use technical analysis for swing trading. This makes your trading research easier and helps forex trading take less time.
- You can also make the most of quick profit opportunities with swing trading. Instead of focusing on the long game, you look for market swings. But with the chance of making money quickly comes more risk if trades go the wrong way. Instead of a price swing in your favor, a quick change in direction can cause your trading account to lose money quickly.
- Swing trading is also more likely to be affected by overnight and weekend market risk, especially if you are holding a position but can’t keep an eye on how the price is moving. Even though swing trading has the potential to make money in theory, it isn’t always more profitable than trading strategies that focus on long-term trends.
Six of the best currency pairs for swing trading
So, here are the six best forex pairs to start watching as part of your swing trading strategy:
EUR/USD
As one of the larger and more stable currency pairs, EUR/USD doesn’t change enough for most day traders to find it useful. But swing traders may be able to make money over the course of several days or weeks. Even though the EUR/USD pair isn’t the most stable, its high liquidity makes it a good one for swing trading. This is especially true for beginners who are looking for simple pairs to start with.
NZD/USD
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 linked to movements in a commodity market. This market is dairy for the NZD/USD. New Zealand is one of the top five countries in the world when it comes to exporting dairy products. This market influence, along with the high liquidity and volatility of this forex pair, makes it a great choice for swing traders.
EUR/JPY
As a major currency pair, EUR/JPY has a lot of available money, which swing traders like. But it is also heavily affected by market trends and how people feel about them. Events in either the European or Japanese economies can have a direct effect on this forex pair, giving swing traders reliable technical indicators they can use to make money.
USD/CAD
Like NZD/USD, USD/CAD is considered a commodity pair because oil is a big part of Canada’s gross domestic product and the U.S. uses a lot of this commodity. So, USD/CAD often moves in the same way as the oil market. This makes it easier to tell if it’s one of the best forex pairs to trade for swing trading at any given time.
AUD/USD
AUD/USD is the third and last of the major commodity forex pairs. It is heavily affected by the precious metals and other exports that leave Australia, as well as the markets for those commodities around the world. Due to its close economic ties with China, the AUD/USD pair is a great way to trade on changes in the Asian and American markets. This pair also has a high level of liquidity, which will draw swing traders who want to make quick money.
EUR/CHF
Even though the EUR/CHF pair usually has low volatility, which makes it a bad choice for scalpers and day traders, it has just enough volatility and high liquidity to make it a good choice for swing trading strategies. One of the best things about swing trading EUR/CHF is that the pair moves in long trends, which lets traders use technical indicators to spot opportunities as soon as they start to form. This means that swing traders can make the most money by opening a position and riding the price gain or loss for most of this long path.