If you are overwhelmed by the huge number of trading strategies in the forex market, you are not alone. With a number of strategies like day trading, swing trading, scalping, position trading, or long-term investing, finding the right strategy that works for you may be one of the most important steps you’ll have to take.
You may have to try different strategies to look for the one that will suit you and gets you ahead. If you want to make a quick trade in currency pairs, but still want to keep your day job, swing trading may be a good strategy for you.
What is Currency Swing Trading?
Currency Swing trading is a short-term market speculation for a trader who is buying or selling currency where positions are held for longer than a single day. Using technical indicators and analysis, traders hold a position anywhere from overnight to several weeks to capitalise on a greater price shift. In other words, a swing trader looks to make a profit from swings, i.e., peaks and dips in momentum.
Swing trading ideal for beginners or anyone with lesser experience. It a good solution if you already have another profession and cannot spend the entire day glued to the screens as it offers traders a huge amount of flexibility. Swing trading is the best strategy to learn the trade and grow in knowledge and experience.
Moreover, in swing trading, when compared to long-term trading the stop-losses are smaller. This gives traders an opportunity to go for large positions instead of those with low-leverage implications.
Read Also: How Much Money Can I Make Swing Trading?
Best Indicators to Build Quick Trades With Currency Pairs for Swing Trading
Take a look at a few indicators to build quick trades with currency pairs below:
- Moving averages: A trend reversal happens when a pair is oversold or over bought and signals a swing opportunity. Moving averages can help a swing trader identify a trend reversal.
- RSI: If you are looking to make profits within a short time frame, RSI (relative strength index) is a great way to identify possible swing trade opportunities. Opening positions on both oversold and overbought positions could lead to profiting off the price gain as well as its decline.
- Stochastic oscillator: The market momentum normally fluctuates ahead of market volume or the price. This makes market momentum a leading indicator. A Stochastic indicator makes a comparison between the most recent closing price and the previous trading range for a given period which helps a trader to predict the swings.
Currency Pairs with the Highest Profit Potential Through Swing Trading in the UK
So how do you identify the currency pairs that offer the highest profit potential through swinging? This is something that most beginners worry about. Can swing trading be done with all the currency pairs? Or is there a particular pair or multiple pairs that swing traders can work best with?
There are a few factors that you need to keep in mind while picking the right currency pairs for swing trading in the UK. A key consideration has to be given to the currency pairs that offer excellent liquidity and enough volatility to create price movements over a short period of time. It is safer to work within shorter time frames because this allows traders to capture profits quickly. Certain currency pairs are stronger due to their close ties to the Eurozone. Swing traders can also consider looking through multiple pairs.
Listed below are some of the major forex pairs to swing trade:
- GBP/USD: Known as the Cable, this pair is a highly volatile currency pair and is among the top most widely traded currency pairs in the world. Due to its frequent and quick paced fluctuations in price and exchange rate, GBP/USD is particularly favoured by swing traders.
- EUR/GBP: This currency pair, known as the Chunnel for obvious reasons, is highly volatile. One of the currencies can strengthen against the other, making the EUR/GBP much more volatile.
- EUR/USD: The EUR/USD currency pair comes from two of the world’s largest economies and provides enough liquidity to offer value to swing traders. This pair, known as the Fibre, is favourable for beginners who are looking for smaller and more frequent earnings.
- NZD/USD: A major commodity forex pair, NZD/USD is a great choice for swing trading because its price swings are often correlated to movement in a commodity market. New Zealand is a huge exporter of milk and other agricultural products and traders can price up the currency in anticipation. Nicknamed as Kiwi, the high liquidity and volatility of this forex pair makes it a great option for swing traders to follow.
- EUR/JPY: Another key currency pair to swing trade is the EUR/JPY. Its high liquidity combined with broad market trends and sentiments make it a good choice for swing trading. Furthermore, economic events in Europe or Japan have a direct impact on this forex pair, creating reliable technical indicators that swing traders can use to turn a profit.
- USD/CAD: Due to their commodity-based economies, trading volumes of USD/CAD is quite high. Oil prices in Canada as well as America’s heavy oil consumption sets this currency pair apart. As this forex pair often moves in correlation with the oil market, it makes it easier for traders to gauge whether they should go for the pairing or not at any given time.
- AUD/USD: Known as the ‘Aussie’ among forex traders, this forex pairing is heavily influenced by commodities, again, mostly precious metals and raw material exports in Australia. Australia has a great commercial relationship with China making the AUD/USD pairing great for trading in both the Asian and American markets. And as in all the other currency pairs, its high liquidity makes it the right choice for swing trading.
- EUR/CHF: The EUR/CHF offers enough volatility and high liquidity, to make it the right currency pair for swing trading strategies. The pair’s long trend movements are often influenced by another volatile pair, EUR/USD. Switzerland has close political and economic ties with its neighbours and has free trade agreements. Traders can use technical indicators to identify opportunities early in their development.
Swing trading is one of the best ways to start off as a new trader. Always open a demo account first and practice with different currency pairs till you become confident enough to start trading.
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