The Forex market is one of the most attractive investment tools for individual traders. The market operates 24 hours a day because it consists of several sessions. One of the trading sessions of the Forex market is the Asia-Pacific session. Let's look at its features, hours of operation, currency pairs that should be traded, and the best strategies.
What is the Forex session?
Let's start with the fact that the Forex market is a market in which foreign currencies are traded, and one local currency is exchanged for another. Traders receive income from currency exchange rate fluctuations. The point is that the traders’ goal is to buy currency at a lower rate and sell at a higher rate. Forex is a 24/7 market because you can trade from any place you are located at any time. The Forex market is open 24 hours a day because it consists of four sessions.
What are the main Forex sessions in the world?
There are four main sessions in the world. The first is the Sydney (Pacific) trading session, which starts at 9:00 pm and ends at 6:00 am UTC. The second is the Tokyo (Asian) trading session, which starts at 12:00 am and lasts until 9:00 am UTC. The third session is the London (European) trading session, which starts at 7:00 am and lasts until 4:00 pm UTC. The fourth is the New York (American) trading session, which lasts from 1:00 pm to 10:00 pm UTC.
What affects the Forex market?
There are a number of factors that affect the Forex market. The first is the interest rate. When central banks raise the interest rate, the country's investment attractiveness increases, and there is an inflow of investors and currency, which strengthens the country's national currency.
The exchange rate on the market is also affected by political decisions and news, and they affect the expectations of market participants, who in turn can create a trend through their actions. Also, the prices of resources and the situation on the stock exchange affect the Forex market.
What are the differences between different Forex sessions?
How do different trading sessions differ from each other? First of all, these are currency pairs that are the most traded during each session. The liquidity of currency pairs and spreads are also different.
European trading session. Approximately 30% of all transactions on the Forex market take place during the London Forex session. During the London session, there is a so-called "overlap" because the last hours of the Asian session coincide with the beginning of the European session.
The main financial centers in which the biggest players of this session are located are such cities as London, Paris, Frankfurt, Zurich, and Luxembourg. The greatest volatility in the entire market is observed just at the opening of the London session (from 9 to 11 pm UTC).
The activity of European players increases precisely during this session, so the biggest fluctuations will be observed in pairs that include such currencies as the Danish krone, the Swiss franc, the euro, and the British pound. Often, it is the European session that is recommended for beginners because this session is characterized by a strong currency movement. In its last hours, the European session also overlaps with the American session.
Any session is characterized by the greatest activity during the first and last hours. This is due to the fact that it is at the beginning and at the end of the day that the market receives news that affects currency rates. Namely, strong currency fluctuations are an opportunity to get the biggest profit. These currency pairs will have the smallest spreads during this session.
American Forex session. The Forex market is affected by many factors, including the situation on the stock exchange, and therefore the American stock exchange, which is the largest in the world during working hours, has the greatest influence on the Forex market. Most economic reports on the US economy are published at the beginning of the trading session in New York.
It also should be noted that the dollar is the most popular currency in the market, so news and events in the US affect all major pairs. The most active trading takes place at the beginning of the session because the session overlaps with the end of the European one, just when European traders close their deals. The greatest liquidity in the market is present in the first hours of the trading session, and then it is fashionable to trade absolutely any currency pair.
Asian Forex session. The largest financial centers of the Asian Forex session are such cities as Tokyo, Hong Kong, and Singapore. During this session, about 20% of all trading operations on the market are conducted. During this session, the Japanese yen and, accordingly, the pairs that include the Japanese yen (USD/JPY, EUR/JPY, GBP/JPY) are very actively traded.
Not only financial institutions but also businesses have a great influence on market trends. Japan is a country with a large volume of exports, so it is worth paying attention to high-profile news related to the largest companies. Unlike the European session, volatility decreases during the Asian session, so short-term trading strategies may be less profitable during this session compared to London or New York.
Pacific Forex session. The Sydney session is considered the calmest of the four main trading sessions. Usually, during the Sydney session, there are no strong price jumps. There are minor price fluctuations. When the stock exchange opens in Australia, there is news that affects the Australian and New Zealand dollars. Therefore, the greatest volatility can be observed precisely in pairs that include one of these currencies. Also, this session has the lowest trading volume.
Best hours for Trading during the Sydney Forex session
The most volatile hours during the Sydney session are the final hours when the session intersects with the Tokyo session. At other times, the trading session is quite calm. Therefore, it is believed that the Sydney session is exactly the trading session that beginners should choose. Low volatility makes it possible to bear smaller losses in the event of a failed deal. So this is the time to learn how to trade and look for profitable entry and exit points.
What are the best currencies to trade during the Sydney session?
After all, at the beginning of the Sydney session, there is an overlap with the Asian session, so in addition to the Australian and New Zealand dollar, there are quite volatile currency pairs. In general, the best pairs to trade during the Sydney session include USD/JPY, AUD/NZD, and AUD/USD, as well as the main pairs EUR/USD, USD/CHF, and GBP/USD.
USD/JPY is the most liquid during the Pacific session, so you will be offered the lowest spreads.
The AUD/USD pair is the most volatile, so trading this pair gives you the biggest potential profit.
What are the best strategies to use during the Sydney session?
Due to the low volatility, it is better to use long-term strategies such as position trading, because in the short term, when using small leverage, the profit may not be noticeable, so it would be more logical to hold the position for a longer period of time and rely on fundamental analysis.
In conclusion, we can note that the Sydney trading session is the least volatile among the main sessions, so it can be good for training beginners as well as for long-term trading strategies. The most popular pairs for trading, and therefore the most volatile, are those that include the Japanese yen, the Australian dollar, and the New Zealand dollar.
Have a good trade