Palacios, who took over from the sacked Julio Leal in March, says he fosters competition between his players and hopes they try harder to get into the team when they know their place isn't assured.
Palacios said ahead of the midweek clash: "The challenge against Swallows will be very difficult.
"But we have a competitive squad and everybody competes for a starting place. We don't have a situation where the starting XI is set in stone.
"There's commitment and discipline from everyone and they fight for a place. I like competition.
"We have a nice situation whereby if one player is missing, the other one comes in and performs well.
"Benni was suspended for our last match (against Jomo Cosmos) and Drogba (Bongani Ndulula) came in and scored. (Rudolf) Bester also scored. So we have to assess the team and decide who plays."
Pirates are aiming to defend their league title and are in second place, behind Mamelodi Sundowns but level on points. The Dube birds are in third, four points behind Bucs, so it will not be an easy encounter for either team.
Of the game's importance, the Peruvian tactician added: "We have to get maximum points. We don't have to concern ourselves much about other challengers like Sundowns, Swallows or Chiefs. Our job is to win all our games.
"Swallows have done extremely well and I'm not surprised that they are in the title race. They came back from two goals down to draw with Ajax in Cape Town.
"Their key players like (Joseph) Makhanya, (Bennett) Chenene and Siyabonga (Nomvete) are all playing well, so we'll have to be careful."
The game is scheduled for an 20:00 kick-off.