There has been a fair amount of discussion (all in good spirits) about whether fading a trend is a profitable and worthwhile strategy. Now that almost everyone who were in the room spoke about it and expressed their respected views, let me put mine and reiterate the policy of C3X and mine personally. So allow me some space.
There is absolutely nothing wrong in fading a trend. Fading becomes even more important if a trade is ranging. Often inability to fade and seeking continuation of a trend can be damaging. To identify a fade top or a bottom of a trade is critical to your success. It is not just enough to wait for a confirmation of reversal but can be important to pick tops and bottoms with regular intervals for the health of your portfolio. Waiting for reversal can work out for some long term reversals but in case of short term reversal and range trades, it is important to get your reversal strategy in place. Please do not ignore it nor should you despise this strategy. Unless you learn it, you are missing an important part of trading forex.
Once again repeat with me: Fading and identifying a fade is critical to the health of your portfolio.
If you dont want to fade, your portfolio profits will be half or even lower cause sometimes, identifying a fade top or bottom also means identifying the end of short term trend and hence to exit trend positions. So you do not have a choice but to learn fading even if you are a trend trader. You might have your personal biases about trading but lets keep that aside and learn what you need about adding this part of the strategy to your trading tools. I strongly suggest you do as much research on fading tools like Netlines, confluence, Bollinger bands. Fading, Reversal/counter trend tools are few in number and far less accurate than trend indicators like stochastics, Vortex, Oscillators and understandably so given how difficult and utterly frustrating it can be at times. There is always an element of risk with the fading but as we always say: Rewards match the risks.
There is a special class of indicators which form the Capital3x Indicators which are a combination of leading and trend indicators. Because they rely heavily on bond market but filtered by the asset on which it is implemented, are accurate but safer tools.
Lets take some examples on ES on friday. Now if you go through thursday and wednesday updates charts and analysis sent across to subs, you realize the point I made about 1375 being a hard stop based on Net Lines and Bollingers. This was pretty much a big barrier and hence the fade top identified about 48 hours before the level was reached. Now why would you not place a short at 1375 and 1380 with a stop above is hard to understand even when I highlighted it importance. This is as simple a fade as it can get. What was the risk of this fade? 7 to 8 handles (but even lesser cause we normally close fades if it is not working). What was the reward of this trade? > 15 to 20 handles? Now you might say that this is hindsight? But how is this hindsight when I actually traded the 1375 to 1360 on Friday with the trade well planned for hours. The reason why I have take this example is so that you understand the need and importance of logic, research and planning behind a trade, more so when it is calling the top of trend which last for 5 consecutive green candles. That is why you need to learn fading.
This is the chart which we used on Thursday updates
C3X short trade at 1375 was backed by research and planning. Not an easy trade to catch the top of a powerful mid month trend which was moving like a freight train. It was kind of a record of sort as uptrend was extending over 5 green candles. The confluence of the Net lines and the 25,2 daily upper Boliinger was never going to be easy and hence the fade trade or a reversal trade (as we like to call it a counter trade). The Short hit targets at 1360 netting an intrad day winner of over 15 handles.
There are more examples of fading that I used during the course of the week: Long USDCAD at 1.0065 and Short AUDUSD at 1.0450 values of both trades can be looked up to see how they too did exactly as we planned. Now its not always fade will be winners and sometimes they can spike through resistances and hunt stops before turning down but it is important to monitor these high risk trades and close if they are bursting through resistances. Now that the point has been conveyed I will not explain these two trades Long USDCAD and Short AUDUSD and will leave it to subs to see how they were chosen.
On the other hand we have gladiator which is a high quality reliable trend indicator which derives its surety and reliability from the bond markets. Let me restress this again. No where on internet will you find a more reliable genuine indicator which derives its moves from markets that matter. Normally other tech indicators rely on their price action to come out with values. For example a stoch indicator on SPX will work on the spx price action alone which is if you think about it, quite limiting in its nature.
The Gladiator gave the -1 at 1369 and clearly was impressive as it gave an intra day move to 1359 which is quite a profitable trade. But at the end of the day it was a reliable trend trade. The fader or reversal trader would short the market at 1375 which is where we shorted and you can always add confirmation once Gladiator confirms with a -1.
From this week on we are counting the ES futures trade call pips along with the forex pips performance as they part of the same portfolio. We also provide a separate section for ES calls below which allows subs to measure our performance vis-vis ES futures along.
Over the course of the week, we issued 24 trade calls making 139 pips. 9 trade hits targets making 354 pips while 10 trades were stopped losing us 215 pips. For the month of July, a total of 101 trade calls have been issued with 50 hitting targets making +2019 pips while 34 were stopped out 756 pips. The total pips for July now stand at 1263 pips with a week to go before we close out the month.
On ES calls, we issued 4 calls. One hit target and two were stopped out. The target hit trade made us 13 handles while the stopped trades cost 7 handles. For the month of July C3X has made 56 handles over 14 trade calls achieving a success ratio of 69%.
So thats it for now. See you subs at my traderoom next week.
Thank you and have a chilled out weekend.
- The July Live Trade Sheet
- The July Live Trade Room
- The Charts corner
- C3X Performance FX portfolio
- The Bond auction schedule can be found here: Bond schedule
- The speaker schedule can be found here: Speaker schedule
The Indicator links are provided here:
1. Falconfx EUR/USD
2. Falconfx EUR/JPY
3. Falconfx USD/CAD
4. Gladiator ES
Indicator Panel for Falcon
Indicator Panel for Falcon and Gladiator