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one one Market regimes for systematic trading will help you understand why a strategy that works under one set of conditions can destroy capital in another. The question is not just does this work, it is does this work now? We will approach this systematically. My name is Ashim Nandi. I'm a system architect with ten years of experience between full time trading and running an IT company. Here are the chapters that will help you understand these concepts better. First, six types of market regimes. You will have a complete classification system for any market condition you encounter. Second, regime identification. You will know exactly which indicators to check and what they tell you. Third, strategy matching. You will understand how to adapt position sizing and strategy selection based on current conditions. Once you go through all these concepts, you will stop wondering why your strategy stopped working. And with that understanding, you'll also see why professional traders can navigate any market environment. Not because they predict what comes next, but because they recognize what is happening now. Thinking odds act with discipline. Markets do not exist in one state. They cycle through distinct conditions, each with different characteristics, different risks, and different optimal approaches. Professional traders classify markets into six regimes. They look at two simple things. First, direction. Markets can go up, down, or sideways. Second, volatility. Markets can be quiet or volatile. Each direction can exist in these two volatility states. Three directions times two volatility states equals six market regimes. Price above the two hundred day moving average. Trend strength, moderate to strong. Volatility, below average. This is the ideal environment for trend following strategies. Normal position size, standard stops. Let profits run. Regime two, bull volatile. Price still above the average, but swinging widely. Momentum strategies can work, but position sizes must reduce by twenty five to fifty percent. Stops must widen to avoid getting shaken out by normal noise. Regime three, bear quiet. Price below the average. Orderly measured decline. This regime is relatively rare. Bear markets typically feature elevated volatility. When they don't, short based trend following strategies can work with normal sizing… Regime four, bear volatile. This is where capital preservation becomes paramount. VIX above twenty five, Price gaps, correlation spike. Position sizes must reduce by fifty percent or more. Most drawdowns happens here. Regime five, sideways, quiet. No meaningful trend. Price moves within defined boundaries. Mean reversion strategies work well here. Buyer support, sell at resistance. Reduced sizing because breakouts can happen suddenly. Regime six, sideways volatile… This is a regime that destroys accounts. No trend, high volatility, Prices whipsaw with no follow through. Professional traders step aside entirely. There's no edge here worth pursuing. Now you have the classification system, but knowing the six regimes does not tell you which one you are in. That is what regime identification gives us. Three indicators. Check daily. Less than sixty seconds. This is all it takes to classify the current regime. Indicator one, trend direction. Price relative to the two hundred day moving average. Above the average, bull regime. Below, bear regime. Crossing back and forth repeatedly sideways. No interpretation required. The math is binary. Indicator two, trend strength. The average directional index, ADX. ADX below twenty indicates no meaningful trend. The market is ranging. ADX between twenty five and forty signals a tradable trend. ADX above fifty suggests extreme trend strength, potentially exhaustion. Notice that ADX measures strength, not direction. It rises in strong downtrends just as in uptrends. Indicator three, volatility state. Compare short term ATR to long term ATR. Ten period ATR divided by fifty period ATR. Ratio above one point twenty five. Volatility is elevated. The volatile version of the regime. Ratio below zero point seventy five. Volatility is compressed. The quiet version. Between normal conditions. The VIX provides the same information for broad equity markets. Below fifteen, low volatility. Fifteen to twenty, normal. Above twenty five, elevated. Position sizes should reduce. Above thirty, extreme fear, often marks capitulation… Here is the critical point. All regime identification is lagging. These indicators tell you where you are, not where you're going. The goal is not predicting regime shifts. It is recognizing them once they happen and adapting before the damage compounds. You now have the classification and identification, But knowing which regime you are in does not automatically tell you what to do about it. That is what strategy matching gives us. Throughout two thousand seventeen, the fix had hit an all time low of nine point fourteen. It closed below ten on fifty separate days, more than the previous twenty seven years combined. Traders built positions that profited from calm markets. Short volatility products like XIV grew to three point five billion dollars in assets. Then in a single day, the VIX spiked one hundred and sixteen percent. XIV lost ninety four percent of its value overnight. Those traders had a strategy optimized for bull quiet and sideways quiet. When the regime shifted to bear volatile, instantaneously the strategy became a liability. Here is the framework for matching strategy to regime. Each regime has three parameters, strategy type, position size, and stop width. In bull quiet, trend following strategies, hundred percent normal position size, stops at one point five to two times ATR. Bull volatile, momentum strategies, fifty to seventy five percent normal size, stops at two to three times ATR. Bear quiet, short trend following. Hundred percent normal size. Standard stops. Bear volatile, defensive positioning or cash. Twenty five to fifty percent of normal size maximum. Wider stops, three times ATR or more. Sideways quiet, mean reversion strategies, fifty to seventy five percent size. Tighter stops at support and resistance. Sideways volatile, avoid trading entirely or reduce to twenty five percent of the size maximum. There is no reliable edge in chop. Notice the pattern. As conditions deteriorate from quiet to volatile, from bull to bear, position sizes reduce. This is systematic risk reduction, not fear based. It is rule based. The formula adapts automatically. Position size equals account risk divided by ATR times multiplier. In quiet regimes, the multiplier is two. In volatile regimes, increase the multiplier to three or higher. The larger the multiplier, the smaller the position. Risk stays constant. Exposure adapts. Here is a psychological challenge. Regime signals are always lagging. By the time you confirm a transition, some damage has happened. The temptation is to wait for confirmation that never feels enough. Professional traders override this instinct with rules. If ADX drops below twenty and volatility expands, position sizes reduce by fifty percent. No discretion, no negotiation… With this, you stop wondering why our strategy fails because now you know the conditions it needs and you have the rules to apply for the right conditions as it changes. This was the chapter seven of our first principles of trading series. So far in the series, we have covered risk, position size, expected value, volatility, liquidity, market structure, and now market regimes. Each layer in this principle of trading series…builds on the last. Together, they form a system. Now that you have this framework, the next question becomes, how do you read the clues the market provides? That is technical analysis. Not as prediction, but as pattern recognition. Tools for reading what is, not forecasting what will be. Markets do not reward strategies. They reward strategies match to conditions. A trending strategy in a ranging market is a losing strategy. Know your regime. Think in odds. Act with discipline. See you in the next…