In this episode of Truth About FX, Walter talks about the Asian Drift, what it is, what it means to traders, and how you can look at it in a favorable way. He gives useful tips about setting boundaries and how the Asian market can actually set your day right.
Download (Duration: 03:14 / 3.71 MB)
In This Episode:
00:38 – wrong turn
01:45 – what you don’t want to take?
02:18 – in order to get in
02:34 – not so good
Hugh: Hi, Walter! This sounds like a Vin Diesel movie but what is the “Asian Drift”?
Walter: I like that. The Asian Drift is this idea that the markets tend to move in the “wrong direction” during the Asian Session. Here is how you look at this: go to your charts and pick out any daily candle, make sure that the candle has a wick — that there is an up wick or a down wick.
What you want to do is see when the open happened — so the opening price on that candle — and the market goes in one direction, obviously during Asia, and then the rest of the day it tends to go in a completely, other different direction.
It is not always the case but is often the case. It does not mean that the low or the high of the days made during the Asia, that can still be made during Europe or New York even but it does mean that there is a little bit of a wick normally either the lower wick on a bullish candle or the upper wick on a bearish candle.
Normally, those will be formed during the Asian Session. Go ahead and look at your charts, see that for yourself. What we found, if you go to the backtesting numbers — what I’ve found, what my students have found, probably many of you have tested this and have found — is that, you do not really want to take a trade during Asia.
What you want to do is you want to let Asia to set the boundaries for the day. If you want to go long… Let’s say, you want to go long on EUR and the EUR goes up a little bit during Asia, goes down a little bit more and it comes back up right about where it started before London opens and then let’s say, it spikes down.
Well, just put your order above the high above the Asian Session and let the market tell you that it is right. Let the market push through that high that was made during Asia. Let it make a higher high in order to get in.
That is how I trade. A lot of my students trade the same way and what’s interesting is lots of students have actually looked at this data and they know that if they take, for example a four-hour candle trade in Asia, the win rate is not as good as it is on the New York candle or European candle.
That is normally the case, typically that is. A lot of signal do not happen during Asia because it’s so range-bound, it does not really move out far. To be fair, it is true that a lot of signals would not actually even occur during Asia.
I am not talking about signals, I am talking about like price action patterns. I am not talking about moving average or cross overs or anything crazy like that.
Hugh: Awesome! I’d never looked at it that closely but, yeah, I’ll give that a look.
Walter: Great! See you next time, Hugh.
Hugh: See you next time, Walter.