Track Market Regime Performance

One of the most expensive mistakes retail traders make is assuming their strategy should work in all market conditions. Professionals know better. Every strategy has an environment where it thrives and an environment where it doesn’t.

If you don’t track performance by market regime, you’ll eventually abandon a good system during the wrong phase—or press too hard when conditions are unforgiving.

Academic research shows that financial markets alternate between persistent trends, high-volatility clustering, and range-bound conditions. The takeaway is simple: your strategy edge is conditional.

Example 1: Trend Strategy in a Chop Regime
Suppose you trade a breakout strategy designed to capture directional moves. During strong trends, performance is excellent. But when volatility contracts and prices oscillate within a tight band, false breakouts multiply. So do your losses.

Example 2: Mean Reversion During Strong Trends
A mean-reversion trader fading overbought/oversold levels may do well in range-bound markets. But during sustained directional moves, those same setups repeatedly fail. Losses will pile up. Without regime awareness, drawdowns can lead you to drop an otherwise solid money-maker.

How Professionals Track Regime Performance

On institutional desks, performance is segmented by:
• Trend strength (e.g., moving average slope, ADX levels)
• Volatility regime (e.g., ATR expansion, VIX environment)
• Market breadth or participation
• Liquidity conditions

This segmentation allows traders to answer:
• When does my win rate rise?
• When does average R-multiple grow?
• When does drawdown accelerate?

If a system historically underperforms in a different market regime, position size can be reduced rather than abandoning the strategy entirely.

Practical Action Step
Review the last 100 trades and tag them by:
• Trending market
• Range-bound market
• High-volatility expansion
• Low-volatility compression

You may discover that your “inconsistent” system is simply misapplied across the different regimes.

Markets change character. Your strategy doesn’t have to. Track when it wins and when it struggles. Adjust your exposure, not belief.

To your trading success!

Mike Siewruk

PS: Was this advice helpful? Feel free to pass this link for a FREE membership to Trade Aptitude along to your trading buddies: thedailymarketforecast.com/signup