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Fade strategy
Most traders will confirm that trading in the long run is a more likely win option for trading
Most traders will confirm that trading in the long run is a more likely win option for trading. However, there are also people who are searching for a period when the currencies are out of the overall trend or, are undergoing a period of correction or backward movements. These are the following lines.
After a certain period of time, when a couple of currencies move in one direction for a long time, correction – reverse movement is most likely to occur. The longer and more pronounced the development in one direction, the stronger the response in the form of a correction, but as with all trading matters, nothing is guaranteed.
Three examples of the Fade the move are described in this graph. The first is based on a 5 day upward movement up to 230 pips followed by a correction of 110 pips in the opposite direction. The second example is a seven day bull motion of 380 pips with a correction of 220 pips. The third example shows a six day bull motion in the volume of 360 pips, followed by a correction of 85 pips.
After every powerful move in one direction, the opposite movement, correction or consolidation is followed. Turning Fade the move means that the trader waits for a moment when the upward movement stops. This cessation may occur, for example, in the level of support, resistance, according to the Fibbonaci sequence.
Movements can be further identified by candles that are created at the stop. The trader watches the various formations that arise in the surroundings of creating support, long wick or sirloin formations expressing reverse bull movement.
Once this moment occurs, the merchant moves faded. In other words, it starts trading in the opposite direction of the original move, which in our case means that it will sell or Faddle a couple of AUDJPY.
Fade the Move is often used by traders working with fundamental data in a shorter timeframe, after the release of the news reports has made a significant movement of the pair in one or the other direction. The process assumes that after an initial price increase, there will be an opposite reaction, download or correction where Fade strategy can be applied.
In this context, it is important to remember that if a trader trades against the prevailing trend, in the short or long term, he takes on other risks.
The described procedure can be demonstrated in our graph, where it is evident at first sight that there is no correlation between the force or the length of motion and the magnitude of the correction.
The described case represents one of the biggest challenges in trading against the trend, because it can return at any time in the long run.
And the last one:
If a trader uses a downward trend strategy, he will wait for the moment the pair moves to the bottom and Fade the move by buying that pair. Traders working with fundamental data in a shorter timeframe, after the release of the news reports has made a significant movement of the pair in one or the other direction. The process assumes that after an initial price increase, there will be an opposite reaction, download or correction where Fade strategy can be applied.
In this context, it is important to remember that if a trader trades against the prevailing trend, in the short or long term, he takes on other risks.
The described procedure can be demonstrated in our graph, where it is evident at first sight that there is no correlation between the force or the length of motion and the magnitude of the correction.