The futures market is always changing. Us as traders need to learn how to adapt and change our trading strategies based on the changing futures market.
The stock market meltdown earlier this year is a perfect example of change. I can explain events like that all day long, but unless you’ve lived through it, you can’t fully appreciate the insanity. There’s no frame of reference until you see it firsthand.
I talk a lot about context and why it matters so much in trading. I can teach strategies. I can show students how to read clues in the order flow. But whether I take a trade—and how I manage it if I do—depends entirely on the context of what’s happening right now. Trades must be based on what the market is doing in the moment, not on what you hope it will do.
You have to recognize when conditions are conducive to opportunities that justify the risk—and when they’re not.
A Clear Shift in Market Behavior
Everyone has noticed how much the markets have changed over the last month.
Volatility is nothing like it was earlier in the year, and certainly nothing like most of last year. Yes, we still get the occasional big day, but it’s been a while since we’ve seen weeks of sustained daily movement—big runs, sharp reversals, and nonstop action.
Fade trades aren’t nearly as reliable right now. And when they do work, by the time it becomes obvious, the fade is already over.
Trends can be great when the market turns into a one-way street, but those runs are often impossible to anticipate in advance. It’s easy to join too late and get chopped to pieces on every pullback.
Markets change. That’s their nature.
Sometimes they go from slow and boring to completely unhinged in the blink of an eye. Other times, the change builds gradually. You start to notice that what’s happening isn’t temporary—it’s a new environment that’s likely to stick around for a while.
This particular shift began in the last week of January. While it was unexpected at first, it quickly became clear that something fundamental had changed in how markets were behaving. That requires adaptation.
What This Looks Like in Treasuries
Using Treasuries as an example—since that’s what most of my customers trade—take a look at the DOM.
Historically, it’s common to see 1,000 to 2,000 contracts resting at most prices in the 10-year. They may not all trade, but that level of supply is usually there.
What we’re seeing now is different.
You may still see 1,000–2,000 showing away from the inside market, but when price actually trades there, the bid or offer can suddenly drop to 200 contracts or less. Sometimes only a few hundred trade. Sometimes more trade—but price moves much farther, much faster because the real supply simply isn’t there.
Contrast this with last fall, when it wasn’t unusual to see 3,000 to 4,000 contracts at every price, and that volume actually traded. There was very little spoofing. Large institutions were active all day. Smaller HFTs were present but accounted for a fraction of the movement. There was real commitment.
You can even see this contrast intraday.
During the FOMC announcement last month, Treasuries reacted wildly on thin volume immediately after the release—which is normal. But into the close, supply exploded. You could see 3,000 to 6,000 contracts at every price, and they were trading. Institutions were adjusting positions. That environment is completely different from trading thin, reactive volume right after the announcement.
Over the last few weeks, however, most of the movement appears to be driven by smaller orders, relatively speaking.
Why Daily Volume Can Be Misleading
Many traders look at total daily volume and see that it hasn’t changed much. They assume the market is behaving the same way day after day.
Nothing could be further from the truth.
It’s how that volume trades that determines whether you get tight ranges, massive directional runs, or ugly back-and-forth chop driven by small HFTs feeding on each other.
The current reduction in supply at each price is what’s driving both higher volatility and more difficult trading conditions.
How to Adjust
Here are a few practical guidelines.
1. If You’re Losing, Stop
This applies at any time, but it’s especially important now.
If you’ve been on a good run and suddenly hit a couple of bad days, it’s tempting to force trades and throw good money after bad. Instead, step back. Reassess whether something has changed fundamentally.
This environment isn’t good or bad—it’s just different. When the game changes, strategies must change, or at least be adjusted.
2. Be Hyper-Selective With Fades
Fade trades can be brutal in this type of market. They can also pay extremely well when they work.
Because of that, I’m far more selective with entries. Pinpointing price matters more now because there’s often no size to lean on for exits.
If I’m wrong, the market may go through me by four ticks on barely any volume. Or it may move four ticks, hit a sudden wall of 4,000 contracts, and reverse exactly where I exit for a loss.
That’s the nature of this environment. Expectations must change.
3. Adjust Trade Management and Size
Markets often don’t reverse cleanly at one price anymore. They bounce lightly between three or four prices before deciding what to do—or they just keep going.
That means trades often need a bit more room. Not always, but more often than last year.
This doesn’t mean taking reckless losses. It means accepting that you’ll likely see:
- More 3–5 tick losers
- More 5–10 tick winners
Reducing size is often the right move so the P&L swings stay proportional to the wider movement.
4. Don’t Be Afraid to Join the Run
If everything is pointing one way and it feels like the move might already be extended, don’t automatically assume it’s over.
In this market, runs often go much farther than you expect.
You’ll be asked to step up at times with no perfect confirmation—just the recognition that this looks like a train. And if it looks like one, it usually is.
There is no magic indicator that tells you the run will continue. If you wait for certainty, you’ll miss the move. If your mindset or risk management can’t handle that reality, it’s better to stay flat.
Final Thoughts
I don’t avoid these markets. I trade them because there are excellent opportunities.
But I’ve seen this type of action many times over the years, so I know what to expect from a big-picture standpoint.
If you’re new and this is your first experience with conditions like this, there’s no shame in stepping aside. Watch. Learn. Study how price behaves.
When you start to feel more comfortable—and when your reads improve—ease back in slowly with smaller size.
That’s how adaptation happens.
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Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
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