The Anatomy Of The Asian Stop Hunt
AN ATOMY OF THE ASIAN RANGE STOP HUNT
During a stop hunt it is normal to expect that the reversal will occur somewhere between 25 and 50 pips higher than the Asian range. It is also normal to expect that this will entail a journey of 3 pushes or candles to get there. However, it is not that simple and the 3 pushes may occur in increments of different sizes.
It is important to remember this when assessing the movement as it escapes the Asian range and to not simply expect a straight 3 candle movement. For example, the 1st push or candle may be a full 25 pips. At this point price may be held for 3 or 4 candles taking a full hour. At this point it is pushed up another 20 pip making a total of 45 pips from the top of the Asian range and finally another 5 to 7 pip on top of that. The effect of each these moves as follows:
1. Range traders who have taken short positions at the top of the Asian range will have a stop loss somewhere between 25 and 50 pips from this point. Therefore, the initial 25 pip push will take-out the 1st of the stops.
2. The 1st upward movement will begin to entice traders to take long positions on the basis of a breakout trade.
3. This is accentuated by the following period of consolidation where price is being held and traders will be expecting a continuation pattern to develop.
4. It is further accentuated with the next 20 pip push further enticing long positions as price has now been rising for an hour and a half.
5. The last 5 to 7 pip is about taking the last of the 50 pip stop loss’s from the range traders. The last move is almost always just a tap, identified as a pin. The main reason for this is that it costs money to move the market and this is a cheaper option for the MM.