Day trading with the trend or fading the trend? It seems like all of my day trading fading strategies seem to work until there's a massive trend and the system lose a lot of money.. Obviously, I know it's better to trade with the trend but, I was just wondering are there traders that successful fade the market and make money?
It has a LOT to do with what you are trading. Sector based ETFs trend MUCH better than Market based ETFs. If a stock is not moving, meaning it only moves a little a day, you're not going to get a big enough trend intra-day. In volatile markets, there are tons of reversals and fading will work quite well. The market has had many intra-day reversals in the past two months. It's also a good idea to watch the speed of the move. If the market moves fast, it's likely a good reversal as opposed to a continuation. The best moves for continuation are slow and steady. When the market runs up / down a lot quickly off the open, it's not likely to sustain the move, unless its a REAL news move, like a buyout.
They both get you. Trend traders get eaten alive when the market chops longer than they think it can. And like you said, faders get wiped out when it trends stronger than you anticipated. People have been trying to figure out a way around this problem since the beginning of time. When the market is in a strong trend traders write books about how all you have to do is catch a trend. Then when it chops, all the seminars appear which teach you how to make money in any market even if it is not trending. And they do all this just out of the goodness of their heart because, as they show you, they could be making a fortune in the market if they weren't so busy sharing.
I can tell you from experience one thing that does not work. And that is fading until it doesn't work and then switch to trending until that doesn't work. (it's the "doesn't work" part in between each strategy that gets you.)
AWESOME QUOTE! It never fails, switch up the strategy and you get caught on the losing side. It will hurt so bad, you will think they've caught you, but it's you that made the choice.
Yea that's true. They both do get you... I guess the best thing to do is to try to identify a range or trend early before it's too late..
It also has to do with time of day. Typically you can catch some nice trends in the am, but with more volatility, news releases for example. From 11-230 ish a range trade tends to work better. From 230 to close there will usually be a trend move at some point.
focusonmoney Registered: Sep 2008 Posts: 168 10-06-11 02:23 PM Day trading with the trend or fading the trend? It seems like all of my day trading fading strategies seem to work until there's a massive trend and the system lose a lot of money.. Obviously, I know it's better to trade with the trend but, I was just wondering are there traders that successful fade the market and make money? Doesn't matter how you trade if, risk is not controlled and losses kept managable. "Trade what you see, not what you think" and be flexible.