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Mobile communication systems can benefit greatly from the use of adaptive signaling. Adaptive signaling can provide a higher data rate than fixed-rate signaling techniques while maintaining an acceptable bit error rate (BER). This paper explores the use of a block demodulation algorithm for providing the basis for adaptation in fading channels. The modulation parameters are adjusted based the receiver's implicit estimate of the reliability of the current block. An adaptation algorithm has been analyzed in which the receiver estimates the current fading rate, adjusts decision thresholds correspondingly and compares them to reliability information generated by the receiver. The adaptive algorithm has shown greatly improved performance compared to fixed-rate schemes over a wide range of channel parameters.