One important thing that most forex trading gurus rarely talk about is the importance of trading sessions in a winning forex trading strategy. So, here it is: If you want to be a successful forex trader in the long run, your trading strategy should be centred on the major trading sessions in Sydney. Let’s explore why.
First, trading during active market hours offers high liquidity, which is important in any asset market, especially in forex. The whole idea is to trade when there’s a lot of market participation, meaning when liquidity and volume are high so that you can catch the best opportunities.
No single trading session is the best; each of them has its own unique characteristics and advantages. But the Sydney session is where the 5-day-long forex market begins. That’s why, in this guide, we will explore the most widely traded forex pairs during the Sydney hours. Knowing which currency pairs are most active during this time can help you make smarter trading decisions and take advantage of market movements.
Understanding the Sydney Trading Session
You might be aware that there are four major trading sessions in the global forex market, namely:
- The London session;
- The Tokyo session;
- The New York session;
- and the Sydney session.
What you might not know is that the Sydney session kicks off the global forex market every day — it runs from 10 PM to 7 AM GMT. Generally, the session by itself is mainly driven by trading activities in two countries: Australia and New Zealand. Still, as this session overlaps with the Tokyo session, there’s influence from the Japanese markets and parts of Asia. This overlap with the Tokyo session happens between 11 PM and 7 AM GMT, creating more opportunities as both markets are active, increasing liquidity and market activity.
Compared to the London and New York forex sessions, the Sydney session is significantly less volatile. That might sound like a bad thing or maybe even seem less interesting and less profitable, but it isn’t. Yes, Sydney’s trading hours are less volatile and calmer with fewer sudden market swings, but it gives traders more time to analyze price movements and make calculated trades. This session is perfect for trading currency pairs tied to the Asia-Pacific region.
However, to get the most out of the Sydney trading session, it is important to use a reliable forex trading broker like OANDA that offers competitive spreads, advanced trading tools, and easy access to important forex pairs in the session. With that, you can trade smoothly and take full advantage of the opportunities this session offers.
Important Pairs During Sydney Hours
As you might have guessed, the currency pairs that dominate the market during the Sydney trading session are linked to the Asia-Pacific region, largely due to economic activity in countries like Australia, New Zealand, and Japan. The US dollar (USD) also plays a major role during this session because of its world reserve status, meaning it is heavily traded across all sessions. With that said, the major currencies to watch during the Sydney session include the Australian dollar (AUD), the New Zealand dollar (NZD), the Japanese yen (JPY), and the US dollar (USD).
Currency Pairs for the Sydney Trading Session
1. AUD/USD
Pairs involving the USD are heavily traded across all trading sessions, and this is the same during the Sydney trading session. If you’re looking for something with a lot of activity, even in a quiet session like Sydney’s, this is your pair. Why? This particular pair enjoys high liquidity during the Sydney trading session, thanks to Australia’s vibrant economic activity and its close trade ties with the United States.
2. AUD/JPY
This is a unique pair during the Sydney session due to the extended overlap of trading hours between Australia and Japan. Combining two of the most active currencies in this time zone gives you an excellent choice if you’re looking for opportunities influenced by regional economic data, commodity trends, and broader market sentiment in the Asia-Pacific region.
3. AUD/NZD
This is a really significant pair for the geographical region. So, movements in commodity prices, changes in trade relations, and economic policies between these two neighbouring countries would affect the performance of the pair. Therefore, as a trader, you can capitalise on fluctuations driven by differences in interest rates, agricultural output, and mining sector performance.
4. NZD/USD
New Zealand’s economy has huge effects on this pair, which means that releases such as trade balance data and interest rate decisions can create significant price movements, offering traders valuable entry and exit points during the Sydney session.
5. USD/JPY
The influence and strength of the Japanese economy make this pair quite volatile. It is well-traded during the Sydney trading session, which makes this pair highly liquid and volatile. Also, the Japanese yen tends to respond quickly to Asian market developments, making this pair a popular choice for traders looking for consistent liquidity and volatility.
Tips for Trading During Sydney Hours
1. Focus on Key Pairs
If you want the best opportunities during the Sydney trading hours, stick with the most active and liquid pairs, such as AUD/USD and NZD/USD. These pairs typically offer tighter spreads and more predictable price movements, making them ideal for traders looking to capitalise on market trends.
2. Monitor News
Staying updated on regional economic news is crucial. Keep an eye on important data releases and announcements from Australia, New Zealand, and Japan. Even small shifts in economic data can create trading opportunities, so staying informed gives you a competitive edge.
3. Use Proper Strategies
- Range-bound strategies: This unique strategy works great for quiet trading periods like the Sydney session, which often has lower volatility. Basically, range-bound strategies involve identifying key support and resistance levels and trading within that range.
- Momentum strategies: You can also try using momentum strategies to capture larger price movements. This would involve trading during the Sydney session that overlaps with the Tokyo session, where volatility and liquidity increase.
4. Risk Management
Sometimes, during lower liquidity sessions, you can experience wider spreads, which can lead to unexpected gaps in prices. If you don’t manage your risk well by adjusting stop-loss orders and sizing your positions properly, you can record losses on trades that might have seemed to be in your favour.
Maximise Your Trades During Sydney Hours
The forex market dynamics of the Sydney trading session are quite unique, and understanding them can give you a strategic advantage to stay ahead in the market. If you focus on active pairs like AUD/USD, NZD/USD, and AUD/JPY — and stay updated on regional economic data and commodity trends — you can quickly spot opportunities in the market. Yes, the Sydney session has a quiet market, but you don’t want to overlook a quiet market because it holds opportunities, too. Instead, adapt your strategies, manage your risk wisely, and take full advantage of the profitable setups the Sydney hours offer.