The Tokyo to London handoff is where the quiet trades die

[Fairman]

The Tokyo to London handoff is where the quiet trades die

Around 7am London, something odd happens on most majors. The Asian range that built slowly for hours suddenly gets tested from both sides within a few minutes, often with a spike in one direction followed by a sharp return.

Part of the reason is simple. Asian desks are closing out books, London desks are opening them, and for a short while neither side wants to carry a big position. Liquidity thins right when new orders start arriving.

A common mistake is treating that first London burst as the start of the day's trend. Plenty of times it is a stop run on the Asian range, and the real move only begins after the sweep is complete.

Waiting for the first spike to fail, then trading the return into the range, has worked better than chasing the breakout for plenty of short term traders. Not always, but often enough to be worth tracking.

One way to test it is marking the Asian high and low on every chart at 7am London, then logging what happens in the first 45 minutes: whether price breaks the high, the low, both, or neither, and whether the break held. A month of that gives a feel for the local tendencies of each pair.

How does that first half hour of London treat setups on the pairs traded most?