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

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center