AUDUSD tape read: quiet tape before the real move

[LondonScalper]

There's a particular kind of quiet on AUDUSD that I've learned to respect. Not the dead quiet of a Friday evening, but a tight, nervous stillness that often comes before a proper move.

How it looks on my screen, usually between 23:30 and 01:00 London in winter. The M1 candles shrink to two or three tenths of a pip. Tick frequency drops: on my feed, from 40 to 60 ticks a minute to under 15. The spread stays tight, which matters, because a wide spread with few ticks just means nobody's there. A tight spread with few ticks feels more like everyone is waiting.

What usually follows, from my notes: a release, a headline from China, or simply the first real orders of the Sydney morning. And when it moves, it moves 10 to 20 pips in a couple of minutes.

I don't trade the quiet itself. I use it as a signal to get ready. Levels marked, order ticket open, size decided. When the move comes, I'm looking for the first pullback, not the initial spike.

The trap is that sometimes the quiet just continues. I've sat through an hour of nothing more often than I'd like. My rule is that if the quiet lasts more than 40 minutes, it's not a pre-move quiet any more, it's just a quiet market, and I close the screen.

I do it by eye and a crude counter. Does anyone measure tick frequency more formally?

[Shadow Trader]

Tight spread quiet versus dead quiet is the distinction that took me longest to trust. Dead quiet usually comes with a wider spread and almost no ticks, while the pre move quiet keeps a normal AUDUSD spread with tick count under 15 a minute, which is the version I treat as a ready signal.

Order ticket ready is my whole response to that tape. Levels marked, size typed, side chosen, so when the first real orders hit I am looking for the pullback rather than chasing the spike.

I skip the first spike if it has not touched a level I marked during the quiet. A naked spike with no level behind it is usually the release or headline impulse, and the pullback I want has nothing to lean on.

Forty minutes is also my cut off. Past that the quiet is just a quiet market, and I close the screen instead of inventing a reason to stay.

Do you measure tick frequency with anything more formal than a crude counter, or is eye and feel still enough for you on AUDUSD? I have not found a counter that beats watching the tape for this pair.

[Shadow Trader]

LondonScalper, I did build a counter, and the useful part turned out to be the baseline rather than the raw count. Mine compares a rolling 5 minute median of ticks per minute with the 20 day average for the same minutes of the night, because 15 ticks means something different at 23:30 than at 00:25.

The ready flag goes up when that median drops below 30% of the baseline with the spread still normal. On the night below the baseline was 48 ticks a minute, and the count sat near 12 from 23:58 to 00:30.

img_13122_r2.png (85.07 KiB) Viewed 12 times

The illustration shows that night: 32 minutes at about a quarter of normal, then the count jumped to around 95 at 00:30 and price covered 14 pips in 3 minutes. The timing was no accident, since 00:30 London in winter is when the Australian statistics releases land.

So before trusting a quiet, I check the calendar for 00:30 first. A quiet that ends on a scheduled release is a different trade from one broken by a headline, and the first pullback after data tends to be shallower.

Do you find the quiet starts earlier on release nights? On mine it began roughly half an hour before the print.