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Asking you what trend we were in right now on a particular pair would be an unfair question, because more than likely we are in an upward trend, of a larger downward trend, of an even larger upward trend and so on. The direction of the trend just depends on the scale of your trade. A fader would trade with the trend by finding the turning points as they hit the bottom of an upward trend. Simply taking trades off the underside trend line of an upward trend does not make high probability trades.
An experienced trader incorporates several different possible tools and factors to determine the significance of a price level. For example, let's say the price was getting to the bottom trend line of an upward trend, the trader noticed that the apparent point where the trend ine intersects would land right on a psychological shield of 00, and also happened to be the 62% Fibonacci retracement level of the past move going upward. Noticing both these conditions, the trader has a better probability of making that trade.
A benefit of fading is that as soon as you fine tune your entries you can enjoy a smaller effective stop loss, therefore allowing yourself to trade more lots and not risk more of your account. So when you are right you earn more money for every pip. Another positive is that you can put your stop losses outside of where the currency has been recently; above resistance, below support or behind some price barrier. If you are putting your stops at levels of price the currency has visited recently then there is no way to keep it from going there again, it is still in a zone of comfort. Most of the techniques that I have designed and trade are based on the fader style of trading. When I do lose, they are tiny losses and manageable. However, when I win, I have a positive risk/reward ratio and pull a healthy profit from the market.
Category: InvestingLanding Pips As A Fader Or Trader? was written by:Author:Rod Alan RichardsonAdded: Wed, 07 Mar 2007 11:02:04 -0500 This Article Has Been Read 388 times View all Rod Alan Richardson's articlesAbout the Author: Rod Alan Richardson is dedicated to teaching people how to succeed in free enterprise through Business Training Training. He also offers a free Leadership Training Newsletter. |
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