Fade

AAA

DEFINITION of 'Fade'

1. A contrarian investment strategy used to trade against the prevailing trend. "Fading the market" is typically very high risk, requiring the trader to have a high risk tolerance. A fade trader would sell when a price is rising and buy when it's falling. Also known as "fading".

2. In a dealer market, it is the failure of a dealer to honor a quote when a customer or another dealer wants to trade.

INVESTOPEDIA EXPLAINS 'Fade'

1. An example of fading would include buying on a dip in price and selling when the price rallies. Often it's a rather volatile strategy, but one which offers the potential for significant short-term gains. It requires little in the way of complicated analysis but the risk that trend continues is always present.

2. For example, if a better bid is posted on another exchange for a security and a market maker is unwilling or unable to match it for a client order, the market maker may offer to trade with the other market maker (with the better price). The market maker offering the better price must accept the offer and trade at the price offered or adjust the bid price.

RELATED TERMS
  1. Memory-Of-Price Strategy

    A trading strategy that assumes the support and resistance points ...
  2. Breakout

    A price movement through an identified level of support or resistance, ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of ...
  4. Trendline

    A line that is drawn over pivot highs or under pivot lows to ...
  5. Buy Weakness

    A proactive trading strategy in which a trader takes profits ...
  6. Contrarian

    An investment style that goes against prevailing market trends ...
Related Articles
  1. Forex: Finding Your Trading Style
    Forex Education

    Forex: Finding Your Trading Style

  2. Day Trading Strategies For Beginners
    Trading Strategies

    Day Trading Strategies For Beginners

  3. How To Use The Forex Pure Fade Trade
    Forex Education

    How To Use The Forex Pure Fade Trade

  4. How To Place Orders With A Forex Broker
    Forex Education

    How To Place Orders With A Forex Broker

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center