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. Contrarian

    An investment style that goes against prevailing market trends ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Rally

    A period of sustained increases in the prices of stocks, bonds ...
  5. Trend

    The general direction of a market or of the price of an asset. ...
  6. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
Related Articles
  1. Trading Strategies

    How risky is it to create a counter-trend trading strategy?

    Read about some of the different kinds of risks involved with trading strategies that rely heavily on countertrend trading, or fading.
  2. Forex Education

    Forex: Finding Your Trading Style

    Determine your own trading style, and the versatile currency market will accommodate it.
  3. Trading Strategies

    Day Trading Strategies For Beginners

    From picking the right type of stock to setting stop-losses, learn how to trade wisely.
  4. Forex Education

    How To Use The Forex Pure Fade Trade

    This intraday strategy picks tops and bottoms based on a clear recovery following an extreme move.
  5. Forex Education

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
  6. Active Trading

    Peak-and-Trough Analysis

    Prices never move in straight lines, so it's time to learn about this powerful trend-following technique.
  7. Trading Strategies

    What does a double bottom tell a trader about the overall trend?

    Learn how a double bottom pattern forms on a price chart and why many traders consider double bottoms to be a sign of reversal in the price trend.
  8. Trading Strategies

    What are the main differences between a double top and a double bottom?

    Identify double tops and double bottoms, and learn what each could mean for the security's current price trend. Discover how other indicators verify movements.
  9. Technical Indicators

    What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these approaches to buying the market.
  10. Technical Indicators

    What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of your investment.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center