Fading the Move and Selling the Rip
Fading a move means trading against it in the expectation that it will stall or reverse — selling into a sharp rally or buying a sharp drop. “Sell the rip” is the counterpart of “buy the dip”: selling after a bounce in a weak market.
After a sharp jump, some traders bet it has gone too far. Fading a move means trading against it: selling into a fast rally or buying a sharp drop, expecting it to stall or turn back. 'Sell the rip' is the short-side version of this idea.
- Category
- Trading Strategies
- Reading time
- 3 min
- Also called
- Fading, Fade trading, Selling the rip
- Updated
Fading in plain words
Fading relies on mean reversion: very large moves up or down are hard to sustain, so prices tend to drift back towards their average.1
Traders gauge how stretched a move is with measures such as the distance from a simple moving average.2
But a price far above its average is not bound to fall back.1
How to fade a move
Spot the stretch
Measure distance from a Moving Average or use Bollinger Bands.
Check the trend
Avoid fading a strong Trend without a reason.
Wait for stalling
Look for the move to slow before entering.
Set the stop
Put the stop just beyond the stretched entry, in case the move keeps going.1
Target the mean
Aim for the average, not a full reversal.
Keep size small
Fades fail when momentum persists.
Worked examples
Example 1 — Rally fades
RevertedA hypothetical share spikes far above its 20-day average, then drifts back.
| Risk | 1R |
| Result | +1.5R |
The spike couldn't hold, and price slipped back towards its average.1
Example 2 — Fading a breakout
Kept runningA hypothetical trader sells a rally that turns into a real breakout.
| Risk | 1R |
| Result | −1R |
Price kept climbing away from the average, and the stop kept the loss to plan.1
Example 3 — Partial reversion
Half wayA hypothetical index drops sharply, bounces halfway, then stalls.
| Target | The average |
| Reached | Halfway |
Price only came part of the way back, so the trader banked some profit rather than waiting for a full return to the mean.2
Fading vs breakout trading
| Aspect | Fading | Breakout trading |
|---|---|---|
| Bet | Move stalls or reverses | Move continues |
| Entry | Against the move | With the move |
| Main risk | Strong trends | False breakouts |
| Best market | Ranges and overstretched moves | Expanding volatility |
Where fading is used
Range markets
Selling near the top of a Range.
Overstretched moves
Using Relative Strength Index or Bollinger Bands extremes.
News spikes
Fading overreactions after Earnings.
Mean reversion
A core Mean Reversion technique.
Advantages and disadvantages
Advantages
- Entries at stretched prices.
- Clear target at the average.
- Works well in ranges.
- Often good risk-reward.
Disadvantages
- Strong trends run over fades.
- Hard to time the turn.
- Stops can be hit by spikes.
- Feels like catching a falling knife.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Fading strong trends
Momentum can last.
Adding to losers
Averaging down a failed fade grows losses.
No stop
One runaway move can be costly.
Expecting a full reversal
The average is a more realistic target.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Fading means trading against a sharp move.
- Selling the rip is the short-side version.
- It relies on mean reversion.
- Strong trends can run over fades.
- Use a stop and target the average.
Frequently asked questions
Is fading the same as buying the dip?
When is fading most risky?
Where should profits be taken?
Further learning
- Mean Reversion
The idea behind fades.
- Bollinger Bands
Spotting stretched prices.
- Breakout
The opposite bet.
- Range
Where fades work best.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- IG. What is Mean Reversion and How Does It Work? (opens in a new tab) Checked .
- CMC Markets. Mean Reversion: Trading Strategies and Indicators (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.