What’s on Your Currency Watch List?

Consistent with the idea that "Champions are built in the offseason," great forex trades, too, are often created during non-market hours. They're the ones that get carefully scouted and planned in advance, starting with the moment they land on a trader's currency watch list.

Now that begs a couple of questions, really, the first one being "Do you have a currency watch list?" And, if so, "What's on it right now?"

In large part, that's what we'll discuss here today, although we'll start with a story of why volatile market conditions make an ideal time to comb the markets for prospective trade ideas…the kind that are most worthy of landing on that aforementioned currency watch list to begin with!

Why You Need a Currency Watch List Now More Than Ever…

At a time when most market participants are really being rattled by crisis rumors and large intraday price swings, those who more calmly embrace it can actually find a wealth of opportunities that didn't exist only weeks ago. That's because bouts of volatility like we've seen recently do much to move currencies and assets out of slow, sideways ranges, and near established support or resistance levels, where breakouts and/or reversals happen.

Currencies that fall into this category become possible candidates for your currency watch list, and this is just one excellent example of how volatility in the markets actually can be a trader's friend. So while many are being stifled and frustrated by the intraday volatility, you'll also see plenty of experienced trend traders feeling re-energized right now while keenly focused on developing a currency watch list…and that's something traders of all experience levels can do right now, too. Here are some other merits to having a currency watch list.

Take trades more naturally and instinctively

Having scouted and planned the trade(s) in question for some time before, it's easier to execute set-ups from a currency watch list once they trigger because there's established intent and an existing commitment to trading that set-up.

Reduce trading fear

Those traders who choose to approach periods of heightened volatility as opportunities to add to their currency watch list are keenly fixated on the positives, and are less likely to become mired in the fear and outside "noise" that often plagues traders during times like these.

See also: Nimble Adjustments Needed in Such Volatile Markets

…And the Assets That Sit Atop our Watch List of Late

Admittedly, fast and furious market movement doesn't always translate into more trading activity. In fact, except for a few selective trades in pairs like GBP/SEK and CAD/JPY, we've largely abstained, in many cases because the suddenly wide ranges have created conditions where risk/reward on qualifying patterns and set-ups just didn't meet our 2:1 minimum. Nonetheless, there are at least a few compelling patterns shaping up on the charts of some less-followed cross pairs, and we're keeping a close eye on them, whether as part of our weekly Market Insider Webinars, or since they have become formal additions to our own currency watch list:

• USD/SEK - As price ping-pongs in a long-standing range between two support/resistance levels, we're waiting for price to approach the lower support boundary in advance of a potential long opportunity
• GBP/AUD - A reversal in a resounding uptrend has recently corrected slightly, entering a zone of indecision quite close to prior support, where a possible reversal to the upside could soon materialize
• USD/SGD - A recent three-bar retracement back down to the 20-period moving average (MA) could set up a rick-controlled long-entry opportunity in the event that an activated bullish bar were presented

As discussed recently, though, in addition to the technical signals and pure price action on the charts, we're also monitoring larger fundamental forces which inevitably have an impact on the markets, and we would advise even the most devout technical traders to do the same.

Conclusion

Trend trades, in particular, rarely come out of nowhere, and so for trend traders especially, the benefits of trading with a currency watch list are extensive. It helps keep you focused and trading with a purpose, and can serve as a welcome distraction in fast-moving markets, because as we discussed, periods of heightened volatility tend to make conditions just right for adding to your currency watch list.

Again, it's funny how the most important trading functions are mostly related to analysis and pre-planning, not to taking actual trades, and this is another key example of that. So take an honest look to ensure that you're "doing your homework" in off-market hours, and that you have a proper currency watch list that can help you confidently plan your upcoming trades. Who knows, your best trade ever could be lying somewhere in wait on that currency watch list right now!