We teach our traders to follow the trend. I certainly can fade stocks. For three years this is how I more than paid the bills from 03-06. And this fading period cemented my tape reading skills. So it’s not that I would never advocate fading as a strategy. Just not now. Not in this market. Well save a few exceptions. Let me offer one.
As a trader there is nothing to get. There is no secret sauce or magic pill. And for three years fading was the way for me to stay in the game. It was the path I needed to take to live to play another day. How I survived to trade August of 07 and the Fall of 08. But overall I prefer to follow the trend. This is where I have made most of my money and suspect where I will continue to make most of my money.
But I do fade even though I teach not to fight the trend, and even though I personally almost always follow the trend with my trading. For me when I notice a stock in an intraday downtrend and the tape CLEARLY show me strength then I will get long. And we had one of those times on the Open in AIG where the tape CLEARLY screamed,” Bella I am strong. Get long!”
AIG opened and started a downtrend. I played the downside momentum. Yesterday AIG had been weak so this initial weakness was to be followed. But then at 29 the bid held. And then again at 29 the bid held. And then again at 29 the bid held. It was like someone jumped out of my computer screen, grabbed me by the shoulders, shook me and exclaimed, “Get long jackass!”
So for me this is an exception. If the tape CLEARLY shows strength and the stock is in a downtrend then I will get long. I have a few others but let me emphasize….a few. I fade only under specific parameters. I am mostly interested in finding strong stocks and getting long or weak stocks and getting short.
Best of luck with your trading!
4 Comments on “Don’t Fight the Trend…. Save”
I know that fading a stock is not an easy thing to do, as most participants are confusing it with trying to pick a top/bottom on a maximum momentum up/downmove which offers a high risk/reward ratio.
I understood that the bidders on the tape of AIG canceled your initial bias of shorting it, so in this way you are saying that not the gap is giving you the direction of the trend but the tape, held bid/offers. So, Bella, if you have time, can you explain a copule of principles which stands for you when you fade a move? How does it look for you a high probability pattern when fading an intraday move?
I know that fading a stock is not an easy thing to do, as most participants are confusing it with trying to pick a top/bottom on a maximum momentum up/downmove which offers a high risk/reward ratio.
I understood that the bidders on the tape of AIG canceled your initial bias of shorting it, so in this way you are saying that not the gap is giving you the direction of the trend but the tape, held bid/offers. So, Bella, if you have time, can you explain a copule of principles which stands for you when you fade a move? How does it look for you a high probability pattern when fading an intraday move?
Bella,
You should also add, that fading isn’t for the novice, new, or inexperienced trader. One miss judged play with enough size can possibly lead to ruin. Back in 2005, I lost my job at prestige prop firm on a “fade” play. “Young” traders should definitely be cautious when attempting to fade the market.
Bella,
You should also add, that fading isn’t for the novice, new, or inexperienced trader. One miss judged play with enough size can possibly lead to ruin. Back in 2005, I lost my job at prestige prop firm on a “fade” play. “Young” traders should definitely be cautious when attempting to fade the market.