Tips for Trading The USD/CHF Currency Pair

The USD/CHF, often called the ‘Swissy’, is one of the five most favourite currency pairs of Forex traders. This article will tell you the advantages and disadvantages of trading the pair, plus tips, strategies, and timing for effective trading.

USD/CHF Characteristics

There are many advantages if you trade USD/CHF. Below are the major ones:

  • Liquidity: The USD/CHF currency pair is less liquid than EUR/USD and GBP/USD, but it’s also less volatile and easier to trade. The CHF rate mostly depends on political and economic instability; it often rises when international turmoil strikes as traders consider the Swiss Franc a safe haven currency.
  • Various trading instruments: There are many USD/CHF trading methods for you to choose from.
  • Availability of resources: Conducting both fundamental and technical analysis on the Swissy is relatively easy. Economic data from the US, Switzerland, and Europe are available on economic websites, while indicators and charts are included with in trading platforms.

Nevertheless, there are also some drawbacks for USD/CHF traders as follows:

  • Safe haven complication: Both the USD and the CHF are considered reserve currencies, so when turmoil strikes, it can be challenging to define which one traders prioritize.
  • Leverage: Leverage can amplify your profits, but it also can increase your losses substantially.  

USD/CHF Trading Tips

Below are the fundamental factors that can impact the USD/CHF exchange rate:

  • Monetary policy: The Federal Reserve (Fed) and the Swiss National Bank (SNB) are the top two factors affecting the USD/CHF exchange rate. The SNB is very active in controlling exchange rates and currency deflation, so you should pay attention to its announcements on monetary policy.
  • Swiss & US economic data: Economic data releases have a large impact on the USD/CHF exchange rate. Some of the most high-impact reports that you should watch include employment data, jobless claims, Consumer Price Index, GDP growth rate, Retail Sales growth, and Non-Farm payrolls.
  • Wars & natural disasters: USD/CHF is highly sensitive to uncertainty, so you should keep informed of live news updates.

The Best Time to Trade the USD/CHF

One of the engaging factors of the Forex market is that it’s available 24 hours on 5 days a week. Nonetheless, trading the whole day has never been a good idea; you will soon be exhausted if doing so on a regular basis, leading to worse trading results.

Regarding the USD/CHF currency pair, big daily moves often appear when Eurozone, Swiss, and US economic reports come in. Therefore, the best time to trade USD/CHF is between 02:00 and 05:00 ET, plus between 08:30 and 10:00 ET.

Effective Strategies for the USD/CHF

  1. Following the Fundamentals

News updates can quickly influence the USD/CHF movements. If you choose to trade based on news reports, then pay attention to the factors below:

  • Economic data releases
  • Live news updates
  • USD/CHF forecasts and daily analysis
  • Technical outlook on high time frames (4-Hour, Daily, Weekly, Monthly)

Some of the most popular news resources for the FX market include Bloomberg, Reuters, and CNBC.

  • Trading breakouts on the 1-hour chart

With this strategy, the first step is to mark the high and low of the previous daily candle. Then, you move to the 1-hour chart to find entries.

If price goes above the previous daily candle’s high and tends to continue in its direction, you can enter a ‘buy’ order. Conversely, if price goes below the previous daily candle’s low and tends to continue in its direction, you can enter a ‘sell’ order.

The stop-loss should be set 30 pips away from your entry, while the take-profit can be left open. If price moves as expected, you will then trail your stop-loss towards the profitable area.

Conclusion

Basically, trading the USD/CHF currency pair is simpler than trading EUR/USD or GBP/USD. However, you won’t want to ignore the following basic rules:

  • Don’t act until the candle of confirmation is fully closed.
  • The risk-reward ratio should be at least 1:2
  • Risk only 1-2% of your account balance on a single trade
  • If there are 5 consecutive losers, stop trading and reevaluate your strategy

Besides using technical and fundamental analysis, choosing the right Forex broker is also important. You should trade with brokers that offer fast trading platforms and low spreads on the USD/CHF.