The Sydney session is the opening act of the forex trading day, beginning at 10:00 PM GMT and ending at 7:00 AM GMT. While it is often quieter compared to the European and North American sessions, it plays an important role in global forex trading by providing initial market activity, particularly for currencies linked to the Asia-Pacific region. Understanding the Sydney session’s dynamics and how it compares to other sessions helps traders optimize their strategies and take advantage of its unique characteristics.

Key characteristics of the Sydney session

1. Early start to the trading day
The Sydney session marks the official start of the global forex trading week on Monday morning in Sydney (Sunday evening GMT). It sets the tone for initial market sentiment and opens opportunities for traders in the Asia-Pacific region.

2. Lower trading volume
Compared to the European and North American sessions, the Sydney session has relatively low trading volume. This is due to the absence of activity from major global financial hubs like London and New York.

3. Narrower trading ranges
Price movements are often smaller during the Sydney session, making it suitable for range-bound trading strategies. Volatility tends to be subdued, except when key data from Australia or New Zealand is released.

4. Focus on Asia-Pacific currencies
Currency pairs involving the Australian dollar (AUD), New Zealand dollar (NZD), and Japanese yen (JPY) see the most activity during this session. Examples include AUD/USD, NZD/USD, and AUD/JPY.

5. Overlap with the Tokyo session
There is a brief overlap between the Sydney and Tokyo sessions, from 12:00 AM to 7:00 AM GMT. This overlap increases liquidity and provides more trading opportunities, particularly for JPY pairs.

Comparison to other sessions

Liquidity

• Sydney session: Lowest liquidity among the four major sessions due to limited global participation.
• Tokyo session: Slightly higher liquidity as major Japanese financial institutions participate.
• European session: Highest liquidity, driven by trading activity in London and other European centers.
• North American session: High liquidity, particularly during the overlap with the European session.

Volatility

• Sydney session: Lowest volatility, with subdued price movements unless regional news or data is released.
• Tokyo session: Moderate volatility, particularly in JPY pairs and Asian equities.
• European session: High volatility due to market-moving economic releases and active participation.
• North American session: Significant volatility, especially during economic releases and the overlap with Europe.

Currency focus

• Sydney session: AUD, NZD, and JPY pairs dominate trading activity.
• Tokyo session: Focus remains on JPY pairs, with some continuation of AUD and NZD activity.
• European session: EUR, GBP, and CHF are the most actively traded currencies.
• North American session: USD pairs dominate trading, with influence on all major and cross pairs.

Economic data impact

• Sydney session: Economic reports from Australia, New Zealand, or China can create short-term spikes in volatility.
• Tokyo session: Japanese data and Bank of Japan announcements often impact market activity.
• European session: European Central Bank decisions, UK data, and eurozone reports dominate.
• North American session: U.S. economic data, Federal Reserve statements, and Canadian reports are key drivers.

Strategies for trading the Sydney session

1. Range trading

• Utilize range-bound strategies that capitalize on tight price movements during low volatility.
• Identify support and resistance levels for pairs like AUD/USD or NZD/USD.

2. Focus on regional events

• Monitor the economic calendar for Australian and New Zealand data releases, such as employment figures or trade balances.
• Be prepared for sudden spikes in volatility if key reports deviate significantly from expectations.

3. Trade JPY pairs during the overlap

• The overlap with the Tokyo session provides more liquidity and activity for JPY pairs like AUD/JPY and NZD/JPY.
• Look for breakout opportunities or continuation patterns in these pairs.

4. Use smaller position sizes

• Lower liquidity can result in unpredictable price swings, so reduce position sizes to mitigate risk.

5. Prepare for the upcoming Tokyo session

• Use the Sydney session to identify technical setups or levels that may influence the Tokyo session.

FAQs

What time does the Sydney session start and end?
The Sydney session runs from 10:00 PM GMT to 7:00 AM GMT.

Why is the Sydney session less active than others?
The session has lower activity because it coincides with night hours in Europe and the Americas, where major financial centers are inactive.

Which currency pairs are most active during the Sydney session?
Pairs like AUD/USD, NZD/USD, AUD/JPY, and NZD/JPY are the most active due to the focus on Asia-Pacific currencies.

How does the Sydney session impact the overall trading day?
It sets the initial tone for the trading day and often reflects sentiment from the weekend or prior session.

Is the Sydney session good for trading?
Yes, the session offers opportunities for traders focusing on range-bound strategies or Asia-Pacific currencies.

Does news from Australia and New Zealand affect the Sydney session?
Yes, economic data from these countries can significantly impact AUD and NZD pairs, creating trading opportunities.

How does the Sydney session overlap with the Tokyo session?
The overlap, from 12:00 AM to 7:00 AM GMT, increases liquidity and activity, particularly in JPY pairs.

Should I trade during the Sydney session if I prefer volatility?
Traders seeking high volatility may prefer other sessions, but the Sydney session is suitable for low-risk strategies.

What are the risks of trading during the Sydney session?
The main risks include low liquidity, wider spreads, and potential slippage in thin markets.

How does the Sydney session compare to the European session?
The Sydney session is quieter, with lower liquidity and narrower trading ranges, while the European session is highly active and volatile.

Conclusion

The Sydney session provides a slower-paced start to the forex trading day, offering opportunities for traders focused on Asia-Pacific currencies and range-bound strategies. While it lacks the high liquidity and volatility of the European or North American sessions, its overlap with the Tokyo session enhances activity and creates additional trading setups. By understanding its characteristics and leveraging its unique features, traders can optimize their strategies for success during this period.