A fade trade is a contrarian trading approach which seeks a reversal in prices. Fade trades are typically utilized for short selling into sharp price advances, or for buying into rapid price declines. In both cases, the trader is seeking a reversal in price with the expectation that the current move is unlikely to continue.
Stock traders use these price spikes to bid into weakness or to offer into strength, often times building a position by scaling in with multiple entries. This improves their average price, thereby requiring a smaller reversal in order to turn a profit on the trade.
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