What If E-mini Trading Market Conditions Change And Your Trading System Underperforms?

By Author: David Adams
Total Articles: 41
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If there is one thing you can count on, it’s the stock market will change trading complexion from time to time. Unfortunately, e-mini trading is no different than the stock market; it is a market of many moods and shades. Good traders learn to tweak their systems to compensate for the new set of variables any market change presents. Sometimes a market will trade in one pattern for a week, sometimes several months or more; when markets change complexion it is up to the e-mini trader to compensate.

Market changes (and the frequent accompanying volatility) occur for a variety of reasons, such as:

• Political Reasons or Political Crisis
• Improper National Money Management
• Supply and Demand Issues
• National Emergencies
• Recession
• Overbought Assets, which often result in equity bubbles.
• Positive developments in all the above variables

Many traders are tempted to completely change their trading system when the market becomes volatile and their system underperforms. I think this is a gross mistake. E-mini systems all have some similar characteristics ...
... and adjusting some of the variables and filters on your current trading system generally will get you back on track.

As a personal example, there were several months last year that my trading was very efficient and I enjoyed some great prosperity. Toward the end of the year, the market conditions changed and it took me a week to make the proper adjustments in my trading. Weeks of transition can be very trying. Some changes I usually experiment with are:

• Time Periods on Indicators or Oscillators
• Try using a Range Chart
• Try using a Renko Chart
• Look for another E-mini contract that is less volatile, like the 6E.

The list is far from inclusive, but illustrates the principle of manipulating isolated variables in your e-mini trading methodology until you find a combination that is consistently predictable and profitable. Be patient in manipulating time periods and other variables; I generally only change one variable at a time so the effect can be attributed to a known catalyst. In short, don’t change too much at one time or you won’t know which change was helpful. I guess the point I am trying to make is that a good system will work in most market conditions if the trader is aware of specific market conditions and compensates for them.

In summary, we have looked at some conditions that can cause the market to fall or to soar. Changes in market pricing have to be traded in a manner that is consistent with the effect of the change. Don’t change your system, adjust it to perform in the new market paradigm.

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