A Quick Overview of How the Momentum System Works – And Why it Works So Well
The Power Emini Momentum System is a “Range Breakout” system.
Shortly after the cash session opens, price establishes a “range” – and then the algo is looking to play a directional breakout of that range – assuming that there will be many days the price breaks out in one direction or the other – and never looks back. Conceptually we are looking to trade the “primary trend” of the market session in the direction of the breakout.
Once price breaks out of the “Range” the software calculates an optimal Entry level and 2 Targets. All we need is a move to Target 1 and the trade is at breakeven. We have the system calibrated for a 75% hit rate on Target 1.
The Targets are designed to lock in profits as the price moves in our favor – and there’s a trailing that stop ratchets along with the price – but hangs back enough so that we aren’t knocked out of the trade on normal counter-trend moves and normal price fluctuation.
Target 1 is typically close enough so that it doesn’t take a whole lot of follow-through to get hit – but it’s also a function of the “fill” we get on the Entry Trigger. We have a page that explains why we use a 1-minute “entry confirmation”: http://www.poweremini.net/entry-trigger/
So in theory when T1 gets hit (75% of the time) the trailing stop will have moved enough to put the trade close to virtual breakeven so that if the price reverses and hits the raised stop it will result in a small gain or loss.
Then the real points are scored when price hits Target 2 – and also the occasional “runner” that goes past T2 on a long-range day. That’s where the system can really cash in big. When price hits T2 then the trailing stop will move to around the Entry price so there’s no risk on any additional contracts held past T2.
Since T2 is a “way out” target, the system is designed to shoot for big point gains. The initial stop starts off fairly wide because we are basically playing the directional trend of the entire session. But everything is “dynamic” meaning that the stops and targets are a function of the ranges and ATR’s in the market in any given session. That way the system adapts to any type of market environment, no matter how volatile it is at any given time.
Ideally there is only 1 Alert per day and the market trends in the direction of the range breakout and never looks back – and continues on to hit both targets.
Some market sessions the price starts off and breaks out of the range in one direction, then reverses before it is able to make it to Target 1, in which case we get stopped out. Then frequently there’s an alert in the opposite direction – which can go on to hit both targets. That’s where a 2nd Alert occurs. It’s also possible to get a 2nd alert in the same direction as the original one – depending on how the price action manifests in relation to the Range. Everything is based on the price action in relation to the Trigger Range – and every aspect of the system is “dynamic” based on the ATR’s and ranges in the market at the time.
The Power Emini Momentum System will adapt to any type of market environment because of this. When the market is volatile and the ranges are wide, the targets are huge. When the market is dull and the ranges are small, the targets and stops adapt to be consistent with the current price action.
There will be occasional choppy days where the price zig-zags above and below the “Range” and those are typically tough days for the system because there’s no real directional movement.
The Alert Software has a “System Notes” section that displays a real-time play-by-play of everything that happens.
We recommend that new users start off with 2 MES micro contracts and just shoot for Target 1 and Target 2, selling one contract at each of those. After a while you can scale up adding contracts, say to 3 contracts, selling 2 at T1 and 1 at T2. The next scale up you’d hold an extra contract for the “runner”.
We have a a step-by-step “Trade Plan” for getting started with the system and the exact progression for scaling up over time:
Now that you have a good overview of how the Momentum System is designed to work, here’s a look at last week’s Alerts for context:
There are some important points about the Momentum System we can glean from last week, which I’ll describe below.
*Market Closed 4/15/22 for Good Friday
Notice that Target 1 got hit for every alert last week. The values shaded in green mean that Target was hit. Those were the results of trading the ES Momentum System “purely mechanically” trading 2 Contracts and selling 1 Contract at each of the 2 Targets. The results don’t take any “Runner” Contracts into account.
4/11/2022 – The system gave a Short alert at 9:39 AM Eastern Time and it took an hour before Target 1 got hit. The market behaves differently each session and the Momentum System creates a sort of “structure” around the current price movement and “reacts” based on what the market gives us each session. It does not try to “predict” anything. Eventually the price made it to Target 2.
4/12/2022 – This was another 3 alert day (I went over an example of a 3 Alert Day in a previous post). The main thing to recognize this day was that all 3 Alerts hit Target 1 but none hit T2. These 3 Alert Days occur when the market is choppy and zig-zagging above and below the “Trigger Range” with no real directional trend. As I mentioned above, the system is designed to “trade around breakeven” on days where the market isn’t trending or doesn’t have a clear directional bias.
One of the “secret ingredients” that makes the Momentum System work so well is this:
Most traders look at any given trade as a binary event – it’s either a winner or loser. The Momentum System introduces the “breakeven trade” – which means that there are 3 different outcomes (win, loss or breakeven) and only one of the three outcomes is a losing trade. Can you see how this tilts the odds in our favor?
Note that we consider a breakeven trade a few points gain or loss. This is because of the slippage between the Alert Price and the actual Fill on the order. In other words if we were to get filled exactly 1-tick past the Alert price – then price hit Target 1 and reversed – hitting the Trailing Stop – it would be exactly at breakeven. However the fills vary based on the Entry Trigger and some are a few ticks or a few points past the Alert price. No big deal – it all evens out over a longer series of trades.
4/13/2022 – This was a strong up day and when the cash session opened, ES rallied the entire day. The system gave a Long Alert at 9:38 which triggered-in at 9:42 and both targets got hit around Lunch time, at which point a 2 Contract trader was “done for the day”. On days where both Targets get hit – once the Trailing Stop eventually converges with the price – the system goes offline for the rest of the day. We consider that a “big winning day” and there’s no reason to stick around and risk giving anything back. Plus, once price has moved away from the “Trigger Range” substantially, it’s highly unlikely we would see another Alert that session anyway. The System only gives an Alert when the price is inside the Range and then breaks out in one direction or the other.
Here’s a screenshot of what transpired on 4/13 so you can see the System Notes that provide a play-by-play of everything that transpired (read from the bottom up).
4/14/2022 – This was an ideal day for the system. It gave 1 Short Alert that hit both Targets by 10:10 Eastern time – for a respectable gain. Here’s a screenshot of the Alert Software for the 4/14/22 session superimposed on the NinjaTrader chart with the relevant levels marked.
Market Closed 4/15/2022 for the Good Friday Holiday
I think you can see by all these examples that part of the the real “magic” behind the system is how the Trailing stop moves at different intervals. That’s one of the most important pieces of the puzzle – along with the idea that once Target 1 gets hit the trade is at or near Breakeven. In addition, the fact that it’s “calibrated” to hit Target 1 roughly 75% of the time – using the current ATR’s and ranges in the market – is really what makes everything work.
And there’s also a lot more going on “under the hood”.
For instance the system does incur “full stop outs” – where we get triggered into a trade and it never makes it to Target 1 – price reverses and hits the Stop. Sometimes it’s the “initial stop” and sometimes it’s a “ratcheted stop”. But then the very next Alert that goes on to hit both Targets typically makes up for the most recent stop-out, give or take a little.
So as long as the “Hit Rate” on Target 1 stays around 70% or more, the system will always be profitable over a long series of trades.
Last year in 2021 the Hit Rate on Target 1 was 73.50%. The Hit Rate in 2020 was 72.57%. So far this year in 2022 (as of the close 4/14/22) the Hit Rate on Target 1 is running at 72.73%. That’s a pretty large sample size!
I don’t know the exact figure but I’m guessing the system maintains profitability somewhere around the low 60% hit rate area. In other words as long as the hit rate on T1 is over 60 something percent, the rest takes care of itself.
We spent 5 years developing this algo.
But the most important part of that journey happened last Summer. In August of 2021 we made some tweaks and modifications that improved the results dramatically – mostly having to do with how the Trailing Stop ratchets and the timing of the Trailing Stop movements. That was when the HUGE breakthrough happened. After all those years of tweaking the internal logic and working with the original Range Breakout concept, we had a sudden breakthrough that changed everything. Actually it was a combination of about 6 different enhancements all rolled out at once – and the algo took on a new life of its own.
Take a look at one of the first versions of the Alert Software from 5-years ago:
The software has come a long way since then!
I hope this post has helped give you some insight into how the Power Emini Momentum System works and I figured reviewing some of the recent Alerts as well as seeing the screenshots and System Notes will give you a better understanding of it. We’re always here to answer any other questions you might have – just click the Contact link at the top of this page.
One last thing…
As I mentioned before – once both Targets get hit, the system stays online and continues to trail the stop until it eventually converges with the price. This is for users that have progressed to holding a “runner contract” past Target 2. On days like today, the entire Alert won’t fit in an Alert Software screenshot, so I pasted in the System Notes for the entire session.
Here’s the fully-automated play-by-play System notes log of what transpired over the entire session for 4/14/22. (Read from the bottom up).
13:45 (est) ES Power Target System Offline
13:45 (est) Trailing stop hit at 4416.00 – System Reset
13:22 (est) Trailing stop move to 4416.00
12:54 (est) Trailing stop move to 4419.25
12:47 (est) Trailing stop move to 4422.00
12:33 (est) Trailing stop move to 4427.25
12:26 (est) Trailing stop move to 4429.00
12:19 (est) Trailing stop move to 4430.75
12:05 (est) Trailing stop move to 4432.50
11:58 (est) Parabolic Stop Move Alert 4416.75
11:51 (est) Trailing stop move to 4435.75
11:44 (est) Aggressive Protection Level 4431.50
11:23 (est) Trailing stop move to 4436.25
10:10 (est) Aggressive Protection Level 4434.50
10:10 (est) Target 2 hit at 4418.50
10:07 (est) Trailing stop move to 4437.75
09:52 (est) Trailing stop move to 4445.50
09:52 (est) Target 1 hit at 4430.00
09:49 (est) Trailing stop move to 4448.75
09:45 (est) T1 = 4430.00 T2 = 4418.50
09:45 (est) Entry Confirmation 4435.75 – Initial Stop 4452.25
09:44 (est) SHORT – Trade Price Barrier 4439.25
09:38 (est) LONG – Trade Price Barrier 4456.25
09:35 (est) ES Power Target System Online RH = 4452.00 RL = 4443.50
Thursday, April 14, 2022 – ES Momentum System – 6/22 Contract
The Power Emini Momentum System “algorithm” is unlike anything you’ve seen before. It’s reacts to the specific real-time price movement each market session. The software displays an Entry, Stop, Trailing Stops and Targets – and is calibrated so that Target 1 will get hit 75% of the time over a longer-term series of trades.
Once target 1 gets hit, a trade is at essentially at “Breakeven”. Take a close look at all the examples above.
Market conditions are very favorable for the Power Emini ES Momentum System, and I’m confident the system will achieve its target hit rate again this year.
Get started right now by clicking below and see for yourself how this system can improve your Futures Trading results:
Everything is included – Scalper and Momentum – Ninja 8 indicator – Free Upgrades. There are no upsells and nothing else to pay. Start Getting the Alerts Today.
NOTE: The Alert Software is a “stand-alone” Windows program and you can easily trade the Alerts on any platform with any broker – NinjaTrader is not required.
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