The last piece of the puzzle is finally in place
As you probably know, Jeffrey and I spent the last 5-years completely focused on developing the Power Emini Alert Software. Little by little we’ve been modifying, tweaking, enhancing and improving the logic that drives the Momentum System algo over all these years. Our mission was to create a fully automated system that can be traded “purely mechanically” – that produces exceptional results.
Here’s a look at “where it started” all those years ago.
Compare that to what the software looks like today:
As you can imagine, creating an “automated algo” that’s consistently profitable is no easy task.
But we started with a unique basic concept – putting a “structure” around the price action to take advantage of price movement. We know the price is going to move – both up and down – and we know it trends. So the idea was to identify a trend and jump on board. Every single market session manifests slightly differently, so the logic had to be “dynamic”. In other words we had to find a way to calculate all the aspects of each trade based on the current real-time price action the market was serving up that session.
That seems pretty simple right?
But there are a lot of pieces to the puzzle. When price starts moving in one direction it’s simple to jump in a trade. But the hard part is identifying the magnitude and duration of the move. Sure there are support and resistance areas, market profile levels and a host of other indicators one can use. But let’s face it – anytime you place a trade you are at the mercy of the “price behavior” and no one can predict what happens next.
Our “system” does not attempt to predict anything.
As I mentioned, it sets a “structure” around the current price action and simply takes advantage of the price movement based on what the market is doing right now, today – in real-time. You’ve probably read or seen more about the mechanics of how it works in other places on this site, but one of the key “magic ingredients” to the system is this:
When the 1st Target gets hit – the trade is at breakeven.
Think about that for a minute. Most traders think of a trade as either a winner or a loser. But we introduce a 3rd option – the breakeven trade. Now, only 1 out of 3 “outcomes” on any given trade can be a loser. I think you can easily understand how this tilts the odds in our favor.
It sounds simple right? Moving your stop to breakeven?
But there’s a lot more to it which I won’t get into here. We have plenty of other posts and documentation that describes how the system works in depth.
My point is that the Momentum System has evolved over the last 5-years – with tons of small tweaks, improvements and enhancements to the logic along the way.
Just last year, in 2021 we rolled out 12 modifications to the back-end algo, which vastly improved the performance. It was running like a finely-tuned machine.
But there was still one little problem…
Market conditions change. They evolve. Volatility, Ranges and ATR’s expand and contract. And in 2022 I can tell you that they have expanded dramatically. Because of this “range expansion”, the Momentum System “initial stop-loss” was “just too wide” during certain market sessions.
(So we decided to fix that)
Announcing the 18 point “Fixed Maximum Stop” for the ES Momentum System
(The automated System Notes provide a real-time play-by-play of every event – read from the bottom up)
Going forward, every Alert has a fixed max stop of 18.00 points per contract.
This sets a specific maximum risk for every trade.
Months of research and testing went into this “enhancement” and I expect great things going forward as a result.
Last year in 2021, only 7 out of 400 Alerts hit a full stop-out greater than 18.00 points. Our testing on the last 3-years of Alert data revealed that 18 points was optimal. This is the perfect place to set the maximum stop during volatile market conditions.
Keep in mind most of the time the “fixed max stop” won’t even come into play. In other words, the stops during normal market conditions seldom have even been close to 18 points. But for occasional volatile sessions it “quants out” when we use this new fixed max stop.
Let me repeat that – In normal market conditions the initial stop won’t be anywhere near 18 points. It will be a lot less than that.
Overall, this is a huge breakthrough improvement to the system.
Every other aspect of the system still functions the same way it always has. Once Target 1 gets hit, the trailing stop “ratchets” to put the trade at virtual “breakeven”. The Targets, Trailing Stops, and timing of the Alerts had already been perfected.
There is no upside limit to the Targets
The big benefit here is that we are limiting our downside and there’s unlimited upside. When we encounter an extremely volatile market session, if both Target 1 and Target 2 get hit, the win can exceed the fixed max loss dramatically. The system now officially “cuts the losers short” and lets the winners run.
The funny thing about this new upgrade to the logic… Over the years I’ve had a few users email me with this exact idea. Their emails basically said “I did some analysis on your signals and found that setting a maximum stop-loss doubled the results”.
But initially we were not convinced. After All, the system was designed so that everything was “dynamic”, meaning the stops and targets were based on the ATR’s and ranges in the market for any particular market session. It honestly took the “change in environment” to convince us that this was the missing piece of the puzzle. The increased volatility revealed a tiny flaw in the logic. After all, as I mentioned, in prior years it was very uncommon to ever see a stop over 18 points on an Alert.
The new system limits any stop-out to a fixed amount.
Earlier this year I added an article to the Momentum System Help / Documentation – about tactics for trading “extremely volatile conditions”. I recommended using a “max stop” if the Range was over 20 points.
But rather than making that a “discretionary tactic” we decided to hard-code it in the logic of the system. Upon careful revue and analysis, it indeed turned out to be the “game-changer” we’d been looking for. Going forward I expect that we’ve tilted the odds even more in our favor – and this enhancement vastly improves the Momentum System performance.
The Power Emini ES Momentum System now employs a fixed maximum stop of 18.00 points per Contract.
The initial stop, and all subsequent trailing stops will never exceed 18.00 points – so we know our “max risk” up front.
The upside remains unlimited – especially for those traders that hold a “runner” contract.
The System is calibrated to “ratchet the initial stop” to breakeven as quickly as possible.
With this new upgrade in place, now is the perfect time to take the Power Emini Alert Software for a test-drive yourself. Just trade it “purely mechanically” using the “Detailed Trade Plan” explained in the Help, and I think you will be blown-away by the results.
You Won’t Find An Easier To Use Trading System Anywhere
The Power Emini Alert Software gives you an easy to follow – highly accurate trading system.
Entry Price – Trailing Stops – Dynamic Targets
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