Faders And Traders
- Date: 2007-06-22 - Word Count: 448
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The differences between traders and faders are mostly their market momentum and entrance. A trader will wait for the market to get momentum in one direction or another and then get in to ride some of that movement before it ends. The faders usually use a good understanding of price shields to determine the end of a run and take a trade in the opposite direction to catch the retracement. Traders will usually try to live by the mantra, trade with the trend, the trend is your friend which is not a horrible idea, and believe it or not, you can be a fader and trade with the trend.
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 use trend trading to find points when they hit the bottom of a trend going up. Simply trading off the bottom trend line of an upward trend does not yield good probability trades.
An experienced trader adds in several different possible factors and tools to determine the significance of a certain price level. For example, let's say the price was getting to the lower trend line of an upward trend, the trader noticed that the apparent intersection would be on a psychological barrier of 00, and also happened to be the 62% Fibonacci retracement level of the previous upward move. Noticing both these conditions, the trader has a much higher probability of making that trade.
A benefit of being a fader is that once you have fine tuned your entries you can have a much smaller effective stop loss, therefore letting yourself trade more lots and not put more of your account on the line. So when you are right you earn greater amounts of cash for every pip. Another benefit is that you can put your stop losses outside of the places that the currency has been recently; above resistance, below support or behind some price barrier. If youre placing your stops at price levels that the currency has been recently then there is no way to keep it from going there again, it is still in a zone of comfort. Many of the strategies that I have created and trade are based on the fader's way of trading. When I do lose, they are small losses and easy to win. However, when I win, I usually get a positive risk/reward ratio and gain a healthy profit from the market.
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 use trend trading to find points when they hit the bottom of a trend going up. Simply trading off the bottom trend line of an upward trend does not yield good probability trades.
An experienced trader adds in several different possible factors and tools to determine the significance of a certain price level. For example, let's say the price was getting to the lower trend line of an upward trend, the trader noticed that the apparent intersection would be on a psychological barrier of 00, and also happened to be the 62% Fibonacci retracement level of the previous upward move. Noticing both these conditions, the trader has a much higher probability of making that trade.
A benefit of being a fader is that once you have fine tuned your entries you can have a much smaller effective stop loss, therefore letting yourself trade more lots and not put more of your account on the line. So when you are right you earn greater amounts of cash for every pip. Another benefit is that you can put your stop losses outside of the places that the currency has been recently; above resistance, below support or behind some price barrier. If youre placing your stops at price levels that the currency has been recently then there is no way to keep it from going there again, it is still in a zone of comfort. Many of the strategies that I have created and trade are based on the fader's way of trading. When I do lose, they are small losses and easy to win. However, when I win, I usually get a positive risk/reward ratio and gain a healthy profit from the market.
Related Tags: money, market, profit, currency trading, trade, foreign exchange, tools, factors, probability, account, pip, scale, traders, movement, bottom, trade with the trend, stop loss, stops, pair, faders, retracement, upward trend, trend line, riskreward ratio
JARED PASSEY has worked with hundreds of people trading foreign currencies, has created several high-probability strategies, trades professionally AND manages a forex fund. Learn forex trading at Jared's free foreign exchange online seminars. (You may use this article on your website only if the above link is intact.) Your Article Search Directory : Find in Articles
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