Fake Fade Out (FFO) Tactics?

[moishi]

Hello,

I heard that "Fake Fade Out (FFO)" was one of the trading tactics used in the US.
From the name, I suppose this would be the concept based on a failure pattern and would like to know more about it (set-up, entry signal etc).
Anybody who knows this strategy, please let me know where I can find the details.

Mori

 

[Skimbleshanks]

My understanding is that it's not based on a failure pattern, but 'fading' a breakout pattern.

The reasoning is that there are so many newbies out there who are taught the same stuff via courses and books - such as, go long at the breakout of an ascending triangle. So all the little retail boys are buying the breakouts, yet the smart professional traders are shorting the breakout. And that's one of the reasons that there are so many breakout failures. In other words, the little retail boys lose, the big boys win.

 

[chump]

I can't be definitve on this issue ,but basically what I have seen so far might suggest that this type of event may not be ,contrary to some opinion,. a methodogical market maker manouver at all,but more to do with the fact that some traders get 'squeezed' when they fail to see the point at which different timeframes coincide. Others may have a different opinion.

 

[Chorlton]

My understanding is that it's not based on a failure pattern, but 'fading' a breakout pattern.

The reasoning is that there are so many newbies out there who are taught the same stuff via courses and books - such as, go long at the breakout of an ascending triangle. So all the little retail boys are buying the breakouts, yet the smart professional traders are shorting the breakout. And that's one of the reasons that there are so many breakout failures. In other words, the little retail boys lose, the big boys win.

As a newbie to Trading myself, apologies in advance if my question is a bit basic but can you explain what you mean.

Are you suggesting that the smart professionals who are shorting are trading larger sums of money and hence helping to drive the price down??

TA seems an interesting topic and hence I am reading some books about chart formations, etc. However, the more I read, the more I question what "real" influence charts have on future price.

Surely, it's more important to monitor news and buy on positive news & sell on bad news. Or am I talking complete nonsense???

Finally, as a newbie to this site as well, is there any way of knowing which threads you have posted or replied on?????

Thanks in advance.........

 

[cj12]

Hi

Cholton

Welcome to this hard game of trading.you said

(Surely, it's more important to monitor news and buy on positive news & sell on bad news. Or am I talking complete nonsense???)

Most of the news is priced in to the market.exception For something like 9/11. Give you a tip do the opposite of what everyone else is doing.

sun

 

[Chorlton]

Hi Sun,

I accept your point but surely a price can continue to rise for a few days (obviously depending on the stock & type of news) and will therefore not always be priced in.

The issue I'm trying to overcome at the moment is the fact that all TA is based on the "past". I'm reading (with interest) books on the subject of TA but find the examples covering each chart formations (pennants, triangles, head & shoulders, etc, etc) so open to interpretation. On one page, they explain a "perfect" head & shoulders formation, on the next page a different formation (but which also contains almost another head & shoulders formation) !!

My point is that with hindsight, its easy to see a particular formation but at the current time, it seems almost 50/50 as to whether the formation will happen. Thus, how can TA realistically be used to predict future prices??

I really do want to understand this subject (as I generally enjoy the concept) but currently struggling to accept what I'm reading.

Any help, appreciated.........

 

[trendie]

hi Chorlton,

welcome to the biggest computer game on the planet !! ( beats GTA, Halo, etc by a mile )

TA is based on the past: EVERYTHING is based on the past.

TA predicts: not really. it gives an indication of the most likely outcome.

seems 50/50: perhaps. but the point of seeing patterns, is knowing when the pattern is most likely to come good. Also, to identify at what point the pattern has failed, and thus, when to exit a position.
( and consequently, identifying the risk/reward odds )

this is not a perfect game; its about getting an edge.

it is not about prediction: if it were, we would all be winners.

read more widely on these threads, and you will find that exiting a bad trade quickly is "more profitable".
( ie, preserve what already have ).

also, dont get greedy.

hope you find a strategy and instrument to your liking, and welcome to the matrix !

 

[t2wname]

Fading is what market makers do

My understanding is that it's not based on a failure pattern, but 'fading' a breakout pattern.

The reasoning is that there are so many newbies out there who are taught the same stuff via courses and books - such as, go long at the breakout of an ascending triangle. So all the little retail boys are buying the breakouts, yet the smart professional traders are shorting the breakout. And that's one of the reasons that there are so many breakout failures. In other words, the little retail boys lose, the big boys win.

Your comment seems likely to true.

For someone to buy anything, there has to be a seller and vice versa. It is the function of the two main types of market maker to take the other side of the balance of net buying or selling of the public. Fading and scalping are the most common terms used for the two types of market maker.

As an example, imagine there is more buying than there is selling of your favourite market by the public. The fading type of market makers will be selling and putting the price up, so if there is again more net buying they can sell at a higher price. As long as your favourite market has existed this has been true and as the market still exists the faders have been making money fading the public and it has been the faders who set the prices the public deal at.

Fading requires a large amount of capital to keep on buying into falls (accumulation) and selling into rises (distribution).

This fading is not to be confused with scalping, namely the attempt to buy at the bid and sell at the offer. Scalpers rarely go home with a position, trying to be flat - that is have no net position the vast majority of the time even during market hours. Unlike the faders, if the market prices (which are set by the faders) moves against the scalper, they take their loss immediately. The reason is simple, the profit from scalping is normally one tick, so losses must be cut very quickly or they overwhelm the profits.

Scalping requires relatively little capital compared to fading but the majority of pit traders by number, if not by capital employed, are usually scalpers.

Hope this helps to put in context your comments about the "retail boys" and "big boys". The actions you describe are nothing more than an example of business as usual.

 

[Chorlton]

hi Chorlton,

welcome to the biggest computer game on the planet !! ( beats GTA, Halo, etc by a mile )

TA is based on the past: EVERYTHING is based on the past.

TA predicts: not really. it gives an indication of the most likely outcome.

seems 50/50: perhaps. but the point of seeing patterns, is knowing when the pattern is most likely to come good. Also, to identify at what point the pattern has failed, and thus, when to exit a position.
( and consequently, identifying the risk/reward odds )

this is not a perfect game; its about getting an edge.

it is not about prediction: if it were, we would all be winners.

read more widely on these threads, and you will find that exiting a bad trade quickly is "more profitable".
( ie, preserve what already have ).

also, dont get greedy.

hope you find a strategy and instrument to your liking, and welcome to the matrix !

Well, Trendie..... I think I'll take the RED pill and see how far this rabbit hole goes...............