fade

Fade investors zig when everyone else zags. They have strong stomachs, a sense of independence, and an ability to resist the temptations of going with the crowd. That can mean picking up a few dogs, and that can mean sticking with a stock if it has become a dog. Fade investors are not always right, but the philosophy has attracted many happy investors over the years. Even Burton Malkiel, who developed the random walk theory, which says there is no reliable way to beat the market in the long run, acknowledges that contrarian strategies can be successful. They tend to outperform other trading strategies because market reversals are often based on economic facts rather than investor psychology.

It is important to note that fade investing often works best for investors who have thoroughly analyzed the fundamentals of the companies they invest in. Companies with solid management teams, innovative products, efficient processes and good profit margins can often weather being unpopular with the crowd.