Volatility or no volatility is the other side of the same story. You need an edge to succeed. But put when volatility is low and sell covered calls when it is high, for example.
You need to do the following when the trading instruments you're trading has volatility that changes in a way that the results are consistently losing money when in prior you were consistently profitable. * Lower Your Position Size as you've already noted * Backtest your trade systems on many different trading instruments to determine if something else is better suitable for trading via your methods in comparison to ES, SI, TF, CL, DAX. * I will assume you've been trading the above trading instruments during the same time periods. Thus, you've been trading the Eurex DAX around the same time when you would normally trade the Emini ES...essentially trading in the same low volatility market conditions. Solution - You'll need to trade the DAX when its more volatile (a different time of the day) in comparison to trading the DAX when it is less volatile during the time period when you would have been trading the Emini ES. For example, if you've been trading the DAX after 0930am est during the regular trading session of the U.S. markets...you're going to need to start trading the Eurex DAX when it first opens (many hours earlier) via the active European trading session. By the way, yes, the volatility impacting the S&P Emini ES futures is very low and not normal in comparison to prior durations of low volatility trading in the Emini ES. * A record number of money pulled out of the markets in 2012 so far in comparison to other low volatility market conditions. * My personal stats has the Emini ES producing 57% less expansion intervals or wide range bars in comparison to prior low volatility market conditions. Just the above two facts alone will make it difficult for any trader that didn't know he/she was using a trade method sensitive to changes in volatility or didn't know how to adapt their volatility base method when the above conditions occurs. P.S. Emini ES wasn't born until September 1997
Many many thanks for the insight bill, wrb This morning I had a much needed "lift" in my pnl... I was down Monday Tuesday and Wednesday and was on track to reaching that calculated maximum draw down level. I was nervous that I'd have to increase position size to deal with the low volatility, which would cause allot of pnl whipsaw between sessions. I had not thought about reducing trading to a specific point in the day -- I had attempted this before, but had no good results that would allow me to cut out the dead meat times during the day. Right now I trade TF, SI, CL, 6S and FDAX. During the evening I only trade TF, SI and CL. I sometimes disable my automated system based on discretionary calls, which reduces pnl but helps my accounts profit factor. I've reduced my position size, and will increase when volatility picks up.....I probably would still have a net positive pnl, but having negative days almost every other day is not good for the head.....at least my head!