Targets that adapt to the spread

[Amanhasnoname]

A fixed target of three pips means different things when the spread is 0.2 and when it is 1.0. The net profit, the distance required, and the probability of success all change.

An adaptive target adds a multiple of the current spread, so the net objective remains consistent. For example, target equals base plus 1.5 times the spread. When spreads are wide, the target grows, and when tight, it shrinks.

The same logic can apply to stops, keeping the ratio of risk to cost steady.

It makes sense on a cost-to-reward basis. In wide-spread conditions, small targets are not worth taking since costs eat most of the gain. The rule either demands a larger move or skips the trade.

Testing shows whether the adaptive rule improves results over fixed targets. Often it reduces trade count in poor conditions and improves average net profit.

Implementation needs live spread data and care about spikes. Using a smoothed spread avoids reacting to single-tick anomalies.

The principle is aligning the strategy's expectations with the cost environment in real time.

How would results change if targets scaled with the live spread instead of staying fixed?