Fading the entry

[commanderco]

Just wondered who fades the entry into their trades and their experiences of positive slippage as a result?

 

[JumpOff]

I've often heard this term, but don't know what it means. Care to define it?
JO

 

[commanderco]

I've often heard this term, but don't know what it means. Care to define it?
JO

It refers to entering the market on a limit stop against the immediate direction.
ie
Buying the market below it´s current price.
Or selling above the current price.
It is the opposite to a breakout entry.
Advantages are:
1 Entry closer to your protective stop.
In fact your limit stop is usually calculated from your protective stop.

2 Positive slippage.

Disadvantage is obvious. You may miss the turn.
Fade stops are usually entered at critical levels of S & R

 

[c6ackp]

One application of this technique would be trading the aftermath of, say NFP, as it appears that all eyes focus on the 1min chart and all the favourite set-ups. Without using limit stops, getting a decent price at these 1min set-up hotspots is often impossible. Having said that it does require a lot of confidence in your set-up to do this

Steve

 

[roguetrader]

What you describe, in general, sounds a little like a gap fade, the description of the technique is similar to one I have seen before though the one I read would not be my choice, also for that technique the author used crash stops rather than any obvious support . resistance.

 

[JumpOff]

So in order to know if this is for you, you would compare the number of times you picked the wrong place to fade (and the total losses associated with that) against the amount of profit you would miss if you wait for confirmation that the reversal has actually occurred and enter at a 'safer' time, right? (It's a big assumption on my part that there is ever a 'safer' time...) Off the top of my head I would think this would be a bad strategy - because their would never be any big gaining positions to offset the losses........

JO

 

[commanderco]

So in order to know if this is for you, you would compare the number of times you picked the wrong place to fade (and the total losses associated with that) against the amount of profit you would miss if you wait for confirmation that the reversal has actually occurred and enter at a 'safer' time, right? (It's a big assumption on my part that there is ever a 'safer' time...) Off the top of my head I would think this would be a bad strategy - because their would never be any big gaining positions to offset the losses........

JO

Dead right JO

I trade breakouts on CME IMM.
Accuracy around 68%, but pro top in the region of 40 - 170 points ( especially V tops & bottoms)
It is all very well to say " leave the big risk alone" but it generates the explosive profits
as you know.
My new new plan involves use my volatility based stops as a measure of entry.

% A is down around 55% but can be improved with practise, but the good news is risk
has dropped to 18% of the breakout system.
This putting me a day or so early into the trade and if it develops into a breakout then SOP
applies.
W/L is up as is MCI ( my confidence Index) which leads to increased contracts.
I also trade in pairs, one for points and one to run ... helps lessen the pain.
Sometimes if the points trade wins, and I do´nt feel good about the run, I will
can the balance of the trade or revert to breakout if I like the risk or I will roll the trade.

To be honest, I am more concerned with living with the outcome of a losing trade.

 

[nine]

I take both entries depending on the circumstances.

As suggested you need to do your own homework to determine the relationship between the missed trades and the (possibly much) better entries. When you do so you should consider the bet sizing implications for the "faded" trade as it may be a bigger trade if you bet a percentage of equity on each trade. Also consider the psychological implications of missing the entries and whether there is a second entry point, at perhaps a different timeframe, if you miss the first one.