Adjust your expected reward or die

What commonly happens to traders in such an environment is that they will attempt to construct trades with superior reward-to-risk ratios and implicitly set their profit targets too high.  If their entry execution is good, the market will initially move their way, only to stall out and reverse before hitting the intended target.  Hence the frustration many traders feel in a low vol environment:  trades that used to go their way for a profit now fizzle out and have to be stopped for no gain or a small loss.

Something I have been personally struggling with in 2014. The problem is this. Imagine that you are successful only in 30-40% of your trades. These are the trades, where the target reaches minimum 1R. Now in this environment, you cannot simply take the most out of the trade at 1R. Why? Because you would end up losing over the long term since the probability is against you. The minimum should be at least above 2,5R-3R and if the daily ATR is 35pips, you would have to pick top’s and bottom’s,  have a really tight stop to reach max 6R. And I am talking magic here!

The questions is how to solve this puzzle? Find higher probabilities setups and accept lower RR potential. Holding trades over multiple of days. Trading less to earn more. This is something I have been working on lately and so far it is producing better results but I am not there yet to say: I have cracked how to trade consistently every day in these market conditions.

And how are you dealing with current market conditions?

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