What is "Fading"?

I know this isn't a forex classroom forum, but I do here this term the most in this forum. SO... What is meant by "Fading this trade"? I seem to here it most about trading a news release.

Thanks
Rusty

Fading is basically waiting for a spike in price and trading a reversal of that spike. So, for example, a release happens and pushes price up 20 pips where it begins to stall for whatever reason. At this point some of the chaos is over and people begin to rationally think what was just released (silly news traders ), at which point price begins to fall. Trading this reversal is "fading". I would suggest you know what you're doing before you attempt it.

I thought I would give you my interpretation. You see it many times after most releases from my observation, it's basically trading in the reverse direction of the spike in prices after a news release. Anticipating the point at which price will stop and reverse after the frenzy. It becomes so overbought or so oversold so quickly, there is a high percentage chance it will reverse after finding its threshhold. I believe the best opportunities are when the market is trending in a particular direction and the news spike occurs counter trend, but this observation may not be accurate. I hope one of the more experienced news traders will attempt to answer this question. I really don't trade news, but I do like to take these fades when I see/anticipate them.

You are absolutely right that is the best time to fade a trade, when the spike is against the trend and the the numbers are not deviating that much

Here is a graphic aid for you:

As twinchell had said, wait for the price to peak, movement to stall. In this chart, it stalled after the 1st minute.... At this point, you can now go LONG GBPUSD and ride it up to "ground" zero (price before the move) <--- USUALLY.

But sometimes, it does not move all the way down to ground zero. So be cautious!

Likewise, NOT all news produce this kind of move. To know which news move this way - carefully study the Historic Charts!

Moreover, Some news, when retrace is done, will move again in the direction of the spike. If you are a good news trader, you can profit x3.

sorry for the initial mistake with my post - I thought I used a correct chart

Which candle is the "stall" I see a large drop from 1.9023 to 1.9001, but then wouldn't you go long and ride all the way up??

Rusty

Yes, I think what BK meant to say is long. The stall is the second candle, in which case you would trade against the direction of the initial movement.

Research is key and essential to find out how the 'fade' works. Anyone can make money from trading by the fading. But be warry. Fading is harder than expected. Like news trading for spikes, it involves emotion, stress and hardship. Do your research on how fading works. I have my system to fade, which i wont tell anyone how i do it. It isnt hard or too easy. its just that there is a high probability for the price to move back to pre-news market coniditions. Heres a tip, if the numbers comes out as hitting concensus, then there will usually be a spike, lets just say this is for durable good, this is an example. If the numbers hit what the concensus, the price moves, after that first spike, watch it if there is going to be a second spike, if not then fade taht shit (merlin's words). Fading requires getting a few pips and not going for gold. Pick your games wise, not all will fade. I would say 50-70% of news reports retrace right after the news, while others have long term affects. Discover which one does this and think positive on your trading abilities.

OPPS! Wrong CHART!
Anyways... I will reword what I said
Sorry!



I totally agree wth Hunter. Fading is not making a home run! Fade is like a bonus mission! DONT be greedy! And please do proper money management!

All good words! I guess I actually faded a couple news announcements for a few pips a few weeks ago. I think one was the AUD interest rate statement. I didn't get in on the first spike because the spread widened by 7-8 pips, but after a minute or 2 the spike stalled and the spread came back to almost normal, it started to drop, so I went short, almost to the bottom of that spike. It dropped a few more pips, but I got what I wanted, so I was happy. this was with .3 lots on a mini, Just didn't know what it was called. I agree with the research factor, it is very important, and people like Burgerking, and his charts, help immensely!! Keep up the good work!! Now if I can just learn some divergence signals, hmm...

Rusty