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. 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. Debit Spread

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

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center