Fading yourself as a strategy

Discussion in 'Psychology' started by Ghost of Cutten, May 20, 2010.

  1. Down at 1075 S&P I got a bit nervous and bought a small amount of puts. Normally whenever I do this, the market bottoms pretty soon after. I was just wondering, this could be a really good strategy, the "self-fade". Anyone tried doing this?
  2. jj90


    I know I should do it more.
  3. It would only tend to "work" half of the time. You won't know which half will be "good". :confused: :( :cool:
  4. the key phrase is "small amount". i assume that his main position was long, so the idea is to fade one's "small nervous hedging attempts".
  5. Wouldn't you then logically be inclined to consider fading the fade? ... it could go round in circles forever. :confused:
  6. just fade your emotional instincts during market extremes

    e.g. don't sell or hedge during a panic, instead take a small long position

    and don't buy more when shit is flying and everyone is talking about $100 oil and S&P 1300 (e.g. two weeks ago), instead pick up some hedges for your positions or close some winners.

    doing the above is a lot better than 50/50, in my experience. Even when the market collapsed in 2008, you could make a killing going long after the major extreme drops.

    shit just doesnt go straight up or down, no matter how extreme the news/event/situation
  7. The problem is when do you take profit, assuming there is one on the fade.

    5 minutes, 5 hours, 5 days?
  8. Daal


    There is some method to this madness. I sold a bit of SPY at the pre-market -1%, still long some ES. Of course, by the open all the losses were erased. Typically when I get an urge to jump in momentum the market is about to reverse, and when I'm too scared about being long mean reverting assets, they reverse