The difference between a trader and a fader is primarily their entrance and market momentum. The traders usually wait for the market to get momentum in some direction and then buy/sell some stocks to make some money before the run ends. A fader will use a solid understanding of price barriers to determine the end of a move and take a trade in the opposite direction to get the retracement. A trader will mostly try to live by the mantra, trade with the trend, the trend is your friend which is not a bad idea, and you can believe me or not, I think you can be a fader and still use the trend.

If we were to ask you the trend that we were in right now on a certain pair, you probably couldn't answer and it would be a very unfair question. This question would be unfair because many times we are in an upward trend, of a downward trend, and then of another upward trend etc. Trend direction all depends on the scale of your trade. Faders use trend trading to find points when they hit the bottom of a trend going up. Simply taking trades off of the underside trend line of an upward trend doesn't yield high probability trades.

An experienced trader adds in several other possible factors and tools to determine the significance of a certain price level. For instance, let's say the price was getting to the bottom trend line of a trend going up, the trader would notice that the apparent point where the trend ine intersects would land right on a psychological shield of 00, and also happened to be the 62% Fibonacci level of retracement of the past upward move. Noticing both these conditions, the trader has a better probability of executing that trade.

One of the benefits of being a fader is that as soon as you fine tune your entries you may have a smaller effective stop loss, therefore allowing yourself to trade more lots and not put more of your account on the line. So when you make good decisions you make more cash for every pip. Another benefit is that you may place your stop losses outside of where the currency has gone recently; above resistance, below support or behind some price barrier. If you're 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 techniques that I have designed and trade are based on the fader style of trading. When I do lose, they are tiny losses and manageable. But, when I win, I usually have a positive risk/reward ratio and gain a healthy profit from the market.