Power Emini Commentary – Notes – Education – Examples
We started a new thing in 2025. The Power Emini “Notes” section. Below you’ll find ongoing commentary, trade examples, charts and general short-form random posts. This page gets updated every few days, so check back soon.
The Last Trading Session of February Was Wild
This was one of the most volatile sessions of the year. Note the 10-point increments on the “price scale” on the chart and think about the ATR’s of some of those 5-minute candles.
For some background on this session – this was the day President Trump met with Zelensky – which turned out to be one of the biggest news events (so far) this year. But even prior to the news shocks, the opening 5-minute candle of the cash session had a whopping 25.00 point range. The ATR’s were extremely elevated the entire session and price action near the end of the day was jaw-dropping.
One might assume looking at that chart in hindsight it would have been easy to trade, but let me tell you… When the price action is unfolding in the heat of battle and price is swinging up and down 10-20 points every 5-minutes it’s not. This type of “range expansion” is not an every day occurrence, thought we’ve seen a lot more of this type of volatility recently.
There are a lot of interesting things we can glean from this session.
First of which is that it demonstrates why the ES / MES Momentum System has a “max stop” of 18 points. We did a lot of research and back-testing to arrive at that number. The (maybe not so) funny thing is that the Alert that hit the max stop would not have if the system didn’t have a max stop. But we would have had to withstand -26.00 points of “heat” to stay in the trade and there was no guarantee the market wouldn’t continue lower. The max stop lets us quantify the maximum potential point loss on any given trade – so we can plan accordingly. Occasionally the max stop will get hit when it otherwise wouldn’t have, like in this case, but the benefits far outweigh the handful of times that happens. Keep in mind that the upside potential is unlimited.
Another interesting thing about this session was the 10.75 “significant” distance to Target 1. That’s definitely out of the ordinary and was a function of the huge ATR’s and ranges. And of course, also notable was the distance to Target 2, which was a whopping 36.00 points. The fact that was exactly double the max stop is purely coincidence. By the way, that stop-out was the result of the “tape bomb” news event when Zelensky got kicked-out of the White House.
That end of day run-up was something to see too. The market closed +78.00 points higher than the Entry on that last Alert – more than twice the distance to T2.
There’s something else you might already know that makes sense to reiterate here – the system issues a Maximum of 3 “filled” alerts per session. There’s a lot of good reasons for that but I’ll save it for another time. It’s fairly rare to see 3 filled alerts in a session but it happens on occasion when price is all over the map.
I could probably say a lot more about what transpired this session, but suffice it to say that it was an unusual day and doesn’t fall into the category of “normal market sessions”. All in all if you were trading the Momentum System and took all 3 trades with 2 Contracts (shooting for the 2 targets) the net result was a +19.50 point gain assuming your entries and exits matched the system exactly.
I can’t imagine trying to trade a session this volatile on gut feel or just flying by the seat of your pants. I’ll assume some traders made huge bank and others got carried out on stretchers. The great thing about the Momentum System is that it adapts to any type of volatility and it’s up to us to realize when the ATR’s get wide, the Stops and Targets do too. I’ve seen Target 2 over 80 points some years back which makes that max stop seem reasonable.
The Momentum System Provides a Statistical Edge
It’s similar to the house odds in Vegas.
The “edge” comes from a combination of the software logic itself and the strategy we developed for trading the alerts.
More specifically, the edge comes from a combination of the trade setup, the Entry Trigger and the strategy of using Targets and Trailing Stops. In addition, the way the system is designed to “get trades to breakeven quickly” puts the odds in our favor even more. All these parts fit together and are what gives the System a “statistical edge”.
However, there are considerations that come along with trading this (or any other) system. It sounds easy but you have to make sure you have the right mindset and take the correct approach.
You have to think in terms of probabilities. The outcome of any one Alert or trading session is purely random and at the mercy of how the price action manifests after we take a trade. It’s important not to be swayed by short-term results and take a longer-term perspective.
There will be stop-outs and there will be breakeven trades. There will be winning days and losing days. Focusing on the immediate wins and losses are not consistent with trading a system that has a statistical edge. If you think in terms of probabilities, it doesn’t matter whether the next trade is a win or a loss or a breakeven. Focus on the long-term statistical advantage rather than individual results.
Wins and losses are mere data points and there’s no need to be overjoyed or disappointed.
Short-term results are random. The law of probabilities works over a large sample size to bring out the system’s edge.
How to Trade the Momentum System Using Any Platform With Any Broker
I wanted to clear up some confusion about the Power Emini Alert Software and which platforms it’s compatible with.
The Power Emini Alert Software is a “Stand-Alone” Windows program.
You can easily trade the Alerts no matter what broker or platform you’re using now.
It doesn’t matter if you’re using Think or Swim, Interactive Brokers, NinjaTrader, TradingVue, TradeStation, Sierra Chart or any other Futures trading platform. You don’t need anything besides the Power Emini Desktop Alert Software and the ability to execute trades.
We created the software specifically to be completely “platform independent”. Trading the signals using your current platform and broker is simple. You just trade along with the system as it provides all the trade details in real-time.
Here’s a screenshot of the Alert Software I took on 2/24/2025.
(Read the System Notes from the bottom up).
Let Me Show You How Easy It Would Have Been To Trade The Alert You See Above:
1) At 9:37 the software gave an Alert to go Short at 6040.75 (the software has audio alerts too)
2) At 9:44 (7-minutes later) the Alert “triggered-in” at 6038.00 (That’s where you see the Entry Confirmation in the System Notes)
3) As soon as the order is filled, (place a market order) you see the software displayed the Initial Stop and the 2 Target levels.
4) At 9:52 Target 1 got hit at 6030.25 (+7.75 points). You can set a limit order or you can take profits at the targets manually.
5) After Target 1 got hit, the Trailing Stop ratcheted a couple times. Simply drag your stop to the corresponding level.
6) At 10:01 Target 2 got hit at 6012.00 (+26.00 points)
If you were trading 2 Contracts just shooting for the 2 Targets, then you’re done for the day. This Alert captured a +33.75 point gain.
The charts you see on this page show where I manually plotted levels on NinjaTrader charts, but those are just for illustration purposes. The software is completely broker and platform independent and just runs in a Window on your computer.
The #1 Strategy for Staying in a HUGE Trend Move
Yesterday was the biggest down move for ES so far this year. How could you have stayed in a Short trade and captured the big move? By using a Trailing Stop.
I honestly believe that pro-actively using a trailing stop is the best tactic we can use for trading. It’s probably more important than the Entry, but I’ll save that for later. For now, look at this chart screenshot I took of the ES / MES Momentum system yesterday right after the cash session close.
Imagine entering a Short trade shortly after the open and staying in that trade for the entire session. The Momentum System did exactly that.
It was the automated system Trailing Stop that did the hard work. There were 21 Trailing Stop moves from the time of the Entry to the session close – which is unusual and would only occur in a crazy session like we saw today.
The Trailing Stop never got hit the entire session
So I was reviewing how the system reacted this session and it occurred to me it would be interesting to analyze all the Trailing Stop moves. The first thing I wanted to do was reverse the sequence of the Trailing Stops in the System Notes to make it easier – reading from the top down. The easy way to do that was to just ask an AI to re-format it for me.
Here’s the sequence of events and the Trailing Stop moves from the System Notes in the software
Friday, February 21, 2025 – ES Momentum System – March 2025 Contract
—————————————————————————
09:35:00 am ES Momentum System Online RH = 6133.00 RL = 6126.00
—————————————————————————
09:36:40 am SHORT – Trade Price Barrier 6122.50
—————————————————————————
09:38:00 am Entry Confirmation 6122.25 – Initial Stop 6133.25
—————————————————————————
09:38:00 am T1 = 6118.00 T2 = 6108.00
—————————————————————————
09:49:33 am Target 1 hit at 6118.00
—————————————————————————
09:49:33 am Trailing stop move to 6128.00
—————————————————————————
09:51:00 am Trailing stop move to 6124.25
—————————————————————————
10:00:00 am Target 2 hit at 6108.00
—————————————————————————
10:48:00 am Trailing stop move to 6122.00
—————————————————————————
11:37:00 am Trailing stop move to 6110.75
—————————————————————————
11:51:00 am Trailing stop move to 6110.50
—————————————————————————
12:12:00 pm Trailing stop move to 6110.25
—————————————————————————
12:19:00 pm Trailing stop move to 6109.50
—————————————————————————
12:26:00 pm Trailing stop move to 6108.00
—————————————————————————
12:40:00 pm Trailing stop move to 6104.50
—————————————————————————
12:54:00 pm Trailing stop move to 6099.50
—————————————————————————
01:01:00 pm Trailing stop move to 6097.25
—————————————————————————
01:08:00 pm Trailing stop move to 6093.75
—————————————————————————
01:15:00 pm Trailing stop move to 6090.25
—————————————————————————
01:36:00 pm Trailing stop move to 6080.00
—————————————————————————
02:04:00 pm Trailing stop move to 6068.75
—————————————————————————
02:25:00 pm Trailing stop move to 6063.50
—————————————————————————
02:32:00 pm Trailing stop move to 6060.75
—————————————————————————
02:39:00 pm Trailing stop move to 6058.75
—————————————————————————
02:46:00 pm Trailing stop move to 6056.00
—————————————————————————
03:14:00 pm Trailing stop move to 6048.75
—————————————————————————
03:49:00 pm Trailing stop move to 6043.00
—————————————————————————
04:00:00 pm ES Momentum System Offline at 6030.25
—————————————————————————
Here’s where it gets really interesting.
So once “my friend Claude” reformatted the sequence of events from the Alert Software System Notes, he asked me if I’d like some insight into the Trailing Stop moves.
So I decided to ask him this Question:
What’s the average number of points the trailing stop moved?
Answer:
Let’s calculate the average change in trailing stop points. To do this accurately, we’ll need to:
First identify each trailing stop movement
Calculate the difference between each consecutive stop level
Sum up all the differences
Divide by the number of moves
Let’s walk through the trailing stop movements chronologically:
Initial stop: 6133.25
Then moves to:
6128.00 (change of -5.25 points)
6124.25 (change of -3.75 points)
6122.00 (change of -2.25 points)
6110.75 (change of -11.25 points)
6110.50 (change of -0.25 points)
6110.25 (change of -0.25 points)
6109.50 (change of -0.75 points)
6108.00 (change of -1.50 points)
6104.50 (change of -3.50 points)
6099.50 (change of -5.00 points)
6097.25 (change of -2.25 points)
6093.75 (change of -3.50 points)
6090.25 (change of -3.50 points)
6080.00 (change of -10.25 points)
6068.75 (change of -11.25 points)
6063.50 (change of -5.25 points)
6060.75 (change of -2.75 points)
6058.75 (change of -2.00 points)
6056.00 (change of -2.75 points)
6048.75 (change of -7.25 points)
6043.00 (change of -5.75 points)
Total number of moves: 21
Total points moved: 90.25
Average move = 90.25 / 21 = 4.30 points
So on average, each trailing stop adjustment moved approximately 4.30 points. However, this average doesn’t tell the whole story. The movements weren’t uniform – we can see some notable patterns:
The largest moves were -11.25 points (occurring twice)
The smallest moves were -0.25 points (occurring twice)
There were more frequent but smaller adjustments early in the trading session
Later in the session, the adjustments became larger but less frequent
This varying pattern suggests the system might adjust its trailing stop behavior based on market volatility or the magnitude of price movements.
Claude then proceeded to ask me if I’d like him to perform further analysis on the Trailing stop moves.
Of course I would! There’s nothing more fascinating to me than to have an AI analyze our Algo that basically has a mind of its own too.
Claude:
Let me analyze the patterns in these trailing stop movements to help build a deeper understanding of how this trading system appears to operate. Let’s break this down into several key patterns I observe:
Time-Based Patterns:
During the first two hours (9:35 AM – 11:37 AM), the system made relatively quick adjustments, with an average time between moves of about 15-20 minutes. This suggests higher sensitivity during the morning session, which makes sense as this period often has higher volatility in the ES futures market. As we moved into the afternoon, the time between adjustments lengthened to about 30-40 minutes, indicating the system might be designed to be less reactive during typically slower periods.
Magnitude Patterns:
The system seems to have three distinct “modes” of adjustment:
Micro-adjustments: Moves of 0.25 to 1.50 points, which occurred mainly in the late morning (around 11:37 AM to 12:19 PM). These small adjustments suggest the system was “fine-tuning” its position during a period of tight price action.
Standard adjustments: Moves of 2.00 to 5.75 points, which represent the majority of the adjustments. These appear to be the system’s normal operating mode.
Large adjustments: Moves of 7.25 points or more, which occurred just three times (11.25 points twice and 10.25 points once). These larger moves typically happened during periods of stronger directional movement in the market.
Price Action Relationship:
The system entered short at 6122.50 and ultimately ended at 6030.25, capturing nearly 92 points of downward movement. The trailing stop adjustment pattern reveals something interesting about how it managed this move:
Initially, it kept a wider stop (early moves were 5.25 and 3.75 points)
Once both targets were hit (by 10:00 AM), it tightened its approach with smaller adjustments
As the move extended, it began making larger adjustments, suggesting it might be programmed to “give more room” to strongly trending moves
Risk Management Evolution:
The initial risk was set at 11 points (from entry at 6122.25 to initial stop at 6133.25). After hitting the first target, the system appears to have shifted to a more conservative approach, making smaller adjustments to protect profits. However, it still maintained enough flexibility to capture the larger trend, as evidenced by the ultimate 92-point move from entry to exit.
Market Condition Adaptation:
The varying sizes of the adjustments suggest the system might be using some form of volatility measurement. During periods of lower volatility, it made smaller, more frequent adjustments. During stronger directional moves, it made larger adjustments, possibly to avoid getting prematurely stopped out of a trending move.
End Claude response
——————–
So that all sounds pretty logical and explains what transpired pretty well. I’m impressed.
There were a couple minor nuances that I don’t think Claude picked up on – namely that most of the trailing stop moves we based more on price behavior and distance than time.
Honestly this is the first time I’ve used AI in any of these posts or articles. I see others doing it but I’m just not a fan of AI written content when it comes to discussing trading. Analyzing data is one thing but you can rest assured that all the good stuff I’m posting here and everything you’ll see in the future will be written by me personally.
So to summarize: How do you stay in a trade for a 92.00 point MES move?
By using a good Trailing Stop.
Last thing. We know gigantic moves like this aren’t very frequent and the system isn’t swinging for home runs every session. That’s what Target 1 and Target 2 are for – base hits or better. But it makes sense to be set up to capture “runners” when the market serves them up too.
Using the Aggressive Protection Level
I wanted to explain how the Aggressive Protection Level works and today provided an excellent example of how you can use it trading the Momentum system. Basically it’s just a “discretionary tighter stop” the system generates in the System Notes that can be used to scale out when trading multiple Contracts past Target 2.
The Aggressive Protection Level only kicks in after Target 2 gets hit.
On the chart above you can see Aggressive Protection Levels but note that I extended the second one over to the left. It printed at 11:51 which was just after the red candle under the “tion”. You can see the Trailing Stop ratcheted at the exact same time and was 5.00 points above the APL. So at that point, assuming you already sold a Contract at T1 and T2 you had to decide which of those stops to choose. Neither got hit.
One important point is that the Aggressive Protection Level does not close out the trade if it gets hit. Only the system Trailing Stop getting hit closes a trade and resets the system. The reason is that someone might be trading 10 Contracts and choose to protect some of the profits with the APL and let the others ride with the Trailing Stop.
The Trailing Stop is designed to keep us in a larger trend move without getting knocked-out by normal price fluctuation and minor counter-trend moves. And today is a great example of that. The chart above shows how the system stayed in through a normal counter-trend move and the chart below shows how the day ended up.
There’s a lot to say about how the day turned out but there are 2 main things to note:
1) The Trailing Stop “ratcheted” 21 times during the session and never got hit
2) The system caught 98.00 points of “traction” – the maximum price excursion past the Alert price
While this was a fairly unusual session, it’s a perfect example of how it’s possible to catch a “Runner” by holding additional Contracts past Target 2.
We don’t get huge trend moves like this all that frequently, but when they occur the system is able to stay in the move – while protecting profits along the way with the Trailing Stop.
Advantages of Trading a “System”
A trading system is a set of predetermined rules and conditions that dictate when and how to enter and exit trades. Unlike discretionary trading, where decisions are made based on individual judgment and emotions, trading systems rely on objective criteria and data analysis. Trading a system eliminates human biases and emotions which can often lead to poor trading decisions.
So many traders think they can just trade what they see unfolding on the charts each day using some indicators – but basically just “winging-it” beyond that. And that might work to some degree for a while – but eventually every Futures day trader realizes they need some structure to their trading. Otherwise it’s just a constant struggle of making decisions “on the fly”.
Purely discretionary trading leads to a lot of second-guessing. One day you might feel cautious and miss good setups because you hesitated entering on a good setup. Another day you might feel overconfident and take trades when you shouldn’t have. It’s easy to look at a chart in hindsight and think you could have traded it successfully, but in the heat of battle when the price action is unfolding it’s a totally different story.
Some traders confuse a “strategy” with a system. A good strategy is essential too, otherwise it’s impossible to maintain consistency. Most strategies revolve around indicators and patterns that help decide where to take an entry. That’s fine, but there’s a lot more to it.
Even if you have a great setup to enter a trade there are still a lot of decisions that need to be made. Placing the initial stop can seem fairly easy, but from that point on you’re left with decisions on when and where to move the stop and when and where to take profits. That’s the hard part.
It’s extremely difficult “mentally” to stay in a winning trade and traders frequently shortchange themselves by bailing out too soon and missing out on the big moves. Another issue is that the price action varies drastically from day to day and the same strategy that works in “normal” market conditions won’t work when the volatility picks up.
A rules-based trading system (with a quantifiable edge) is far superior to flying by the seat of your pants, trying to make snap decisions on the fly. In a future article I’ll list all the reasons why and delve into all the details, but I’m sure you get the point.
The great thing about the Momentum System is that it provides both a “system” and a “strategy” for trading the system. And also offers flexibility where we can use some discretionary “tactics” at certain times.
More Insight Into the Entry Strategy
Yesterday I got an email asking some questions about how the Momentum system takes an entry. He wanted to know if it was feasible to set a limit order 1-tick past the Alert price instead of waiting for the 1-minute close.
Just to quickly review, when the system fires off an Alert – the very next 1-minute close (at least a tick or more) PAST the Alert price (Trade Price Barrier) is where the system takes the “fill”. That’s when it prints the “Entry Confirmation” line in the System notes.
The problem with setting a limit order just a tick past the Alert price is that many times the price will just poke through that level and never actually close PAST it – in which case the Alert does not trigger-in. It’s that 1-minute CLOSE PAST that helps prevent getting sucked into a false move. But a lot can happen in a minute as you see on the chart below.
One other important point is this: If the system gave an Alert and the “very next tick” past the Alert price triggered-in the trade, you wouldn’t have time to react. This is the main point for posting this example. If you look at the time stamps on the chart below, there was just under a minute from the time the system gave the Alert to the time that Alert filled – on the close of the very next candle.
If the system simply took the trade 1-tick past the alert price, by the time you put your hand on the mouse and attempted to enter the trade, the price would have likely been several points past the Alert price and most of the way to Target 1. That’s also why the Targets are based on the Entry price (not the Alert price). In fast markets it would be physically impossible to replicate the system if it didn’t give you enough time to react.
Speaking of which, the Alert Software gives an “audio alert” when a signal fires off which is great because you don’t have to sit there and stare at the chart the whole time.
Take a close look at the time stamps in the System Notes and look at how it played out on the chart. I purposely posted the 1-minute chart for this example, but we recommend switching to a 5-minute chart once an Alert actually fills. The 1-minute chart is way too hectic and it’s nerve-wracking to watch, especially since the system is shooting for large moves that usually take time to play out. Today was an exception and a good demonstration of serious downside “momentum”.
But the key takeaway here is that the “1-minute close past the barrier” entry strategy is extremely important for two reasons.
1) It gives you time to react and physically enter the trade (market order) at the same level the system shows the fill.
2) It helps confirm there’s enough forward momentum in the direction of the Alert to (hopefully) carry the price to (at least) Target 1.
The main downside to this strategy is when the 1-minute price bar (or candle) is extremely wide which results in a fill way past the Alert price (there’s an example of that below). But we’ve tested it and it quants out best this way and makes the most sense.
Great Days, Good Days, Bad Days, Normal Days
You’ve heard me say it before – “every market session is different”. The price action unfolds in a different manner every day and that’s why we have no choice but to play what the market serves up on any given session. Depending on how we choose to trade the price action, we end up with various outcomes.
I wanted to post today’s chart because it was fairly close to what I’d call a “normal day”. At least what I’d consider normal for the system as far as how it reacts to the price action.
What made it “fairly typical” was the fact there were 2 alerts and the first one didn’t do much for us, but the second one went on to hit both Targets. A “good day” is when both Targets get hit right off the bat. A “great day” is when that happens and the “price scale increments” on the chart are more than a couple points. The ranges and ATR’s this session were definitely smaller than normal.
The Price Scale increments I mentioned are a really important point. Imagine there was no price scale on that chart. We’d have no idea how many points the candles represented and we wouldn’t have any idea what the distances to the stops and targets were. This plays into the whole idea of how the system uses the current real-time ATR’s and ranges in the market to calculate everything.
There are sessions where the price scale shows 5 points between increments and those are what we might call more volatile days. A real volatile day might have 10 point increments. But the point here is that it makes sense to maintain reasonable expectations based on the market’s “ranges”. In other words, the larger the ATR’s, the bigger the targets and the wider the stops will be – in points.
That’s the beauty of the system. It adapts to the day-to-day changes in price action and adapts to various market conditions and longer-term volatility environments. It doesn’t try to “predict” anything – it simply “reacts” to the price action as it unfolds in real-time.
While it’s hard to pin down what I’d consider a “normal” market session, it was a fairly typical day for the system. Every Alert that hits Target 1 (which is most of them) means “we’re safe” from there on – because the trade is basically at breakeven. Then it’s up to the market to decide if it has the “momentum” to take the price to Target 2 and when it does – that’s a big win.
The Challenge of Trading a Choppy Session
I often talk about how difficult it is to trade a choppy market and this is a great example of what that looks like. I’ve seen worse but I think you’ll get the idea looking at this chart.
If you traded this session successfully and made money, congratulations!
So how did the Power Emini Momentum System handle this mess? Well, there were 2 filled Short Alerts and both hit Target 1. Then the price hit the Trailing stop and the day ended up at “breakeven”. It could have been worse. Specifically the net result was the loss of 1.00 MES points (plus commissions) but I call that a breakeven day. I’m also calling it a win because it would have been easy to get chopped-up and lose money trading this type of price action. Trading this chop and not losing money was a success in my opinion.
The market doesn’t trend every day and it doesn’t always provide an ideal trading environment. The system did just fine all things considered. We have to trade what the market serves up.
What a Bad Fill Looks Like
You should be familiar with how the system gets filled on a trade, and it’s quite simple. When we get an Alert, the very next 1-minute closing price bar (or candle) that closes at least 1-tick (or more) PAST the Alert Price triggers in the trade.
On RARE occasion we get a fill that’s way past the Alert Price (Trade Price Barrier) and today was a good example. The system gave a Short Alert shortly after the open and instead of getting filled couple / few ticks past the Alert price, the next 1-minute price bar closed 7.00 points past the Alert. In this case it turned out to be a “bad fill” because there was no follow-through and the trade got stopped out. Fortunately there was a Long alert shortly thereafter that hit both targets which usually evens things out. The Long got filled 5-ticks past the Alert price which is more normal.
So what to do when you see an Alert that’s going to fill way past the Alert price? Well in many cases it’s no big deal because when there’s a lot of volatility and wide ranges, it typically doesn’t matter – price continues to move in the direction of the Alert. But sometimes a fill too far away from the alert price can thwart a trade as it did in this case. The distance from the Entry to target 1 was 4.25 points and if it had triggered-in closer to the alert price it would have hit T1.
But a lot can happen in 1-minute. It’s been several years, but I’ve seen ES move 30 points in 1-minute. That’s an extreme anomaly, but if you ever see something like that I’d recommend passing on the trade.
Generally speaking, the “fill” on an Alert is a couple ticks to a couple points past the Alert price and that’s fine. The stops and targets are calculated based on the actual fill (not the Alert price). When placing an order to enter you might get a slightly better or worse fill than the system and that’s fine too. It all evens out over the long series of Alerts.
Close but no Cigar
Price got within 1 (lousy) point of Target 2 but didn’t quite make it. It happens.
And today provided a good example of several different things to think about when trading the system. The first and most obvious is that when the price gets “really close” to T2, in my opinion it makes sense to consider using a tighter stop. I know everyone loves the idea of trading a purely mechanical system – and that will work out fine over the long run. But using a little discretion on occasion (under special circumstances) you can do better than the system.
In this case there were several options for using a tighter stop when price was right up near T2. I was talking to a new user today and mentioned that when price gets past T1 and about 75% of the way to T2, that’s a good time to be a little more pro-active with the stop. Especially on volatile days like this. (note the 5 point increments on the chart scale).
So the obvious choices when the price was within a point of Target 2 were to go ahead and say “close enough” and take the profits somewhere in the 6050-6055 area. But that’s not always the best option since we know price can blow through T2 and keep going. I think protecting the low of that 5-minute candle might have made the most sense. In other similar cases I’ve suggested tightening the stop to protect Target 1. That would have worked well in this case.
Here’s the thing to think about. When you look at the chart above, at this moment in time it was impossible to gauge where price was headed next. (Similar to any other point in time). The price action was a little unusual given the fact that it was “CPI day” and you can see the pre-market reaction to the “hotter than expected” inflation numbers. At the point the Trailing Stop got hit (2 points below the Entry) it’s easy to visualize the market heading lower. However that wasn’t the case this time.
But the system worked just as it was designed to do. It got the Trailing Stop to (a little better than) breakeven and made sure a profit didn’t turn into a loss. Heck with T1 +5.75 points away from the Entry, this could have been a good trade for some users. Remember, if you’re trading 3 Contracts and selling 2 at T1, you’re always going to have a respectable gain on the Alert – usually about equal to T1.
I’m going to save the rest for another post, but suffice it to say that there are different ways to trade the system. Purely mechanically works over the series, but it’s not unreasonable to consider using a little discretion here and there based on how the candles (or price bars) look at the time. Pro-actively managing the Trailing Stop on occasion can yield good results. Using a tighter stop than the system (which is designed to perform optimally over the broadest spectrum of market conditions) can make sense. It’s never a bad idea to protect profits and a good rule of thumb is when you have a 12-20+ point gain, that’s when it makes the most sense.
10:00 Economic News Chaos
Last month I talked about trading through the 10:00 “economic news releases”. I posted an example of how it can work in our favor, but also discussed how it’s a double-edged sword. Today was a good example of that. The system was Long going into the news and the negative price reaction caused that Alert to hit the stop. But as you can see on the chart, there was an immediate Short Alert that filled a few minutes later that went on to hit both Targets. So it basically evened out.
As I mentioned last month, I don’t recommend avoiding an Alert that fills prior to a 10:00 economic news release because frequently the market doesn’t have enough of a reaction to make a difference. The times when price does make a big move, sometimes it works in our favor and both targets get hit quickly – and other times it results in a stop-out. But over a long series of Alerts (and news releases) it basically just evens out.
Today was a bit unusual because it demonstrates how the price action following a news release that goes against us can trigger an Alert in the opposite direction that goes on to hit both Targets. There’s a lot to see on that chart, but notice how quickly everything transpired. Five seconds after the Long Alert hit the stop, the system fired off the Short Alert. But it took a full 3-minutes for the Short to “fill” which gave users plenty of time to react.
What’s even more interesting is how close the price came to Target 2 in the 10-15 minutes following the initial 10:00 red candle. And also where the system placed the Trailing stop at 10:06 (the yellow line right above the high of the 10:05 candle). So price was sandwiched in between the Entry and the Trailing Stop for over 45 minutes before it took the next leg down. The second big red candle was also the result of news and happened very quickly. Trump said something about “tariffs” and the price plowed through Target 2 in an instant.
Which brings me to another interesting point. I’ve mentioned this in several places before, but it’s an important consideration when trading the Power Emini Momentum system. Sometimes the price just blows through the Targets and it’s possible (or even likely) you can capture more points than selling at the Targets. In this case Target 2 was at 6078.50 and the 1-minute closing price of that candle that hit T2 was 6062.25. That’s an extra 16.25 points of potential gain if one chose to take a deep breath before pulling the trigger.
I could write an entire article about the choice between setting fixed targets and trading manually, but that’s something I’ll tackle in the future. Suffice it to say that strategy is also a double-edged sword because sometimes a target will get tagged briefly and that’s it. If you didn’t have an order in place you might have missed the chance to sell there. On the other hand, there are lots of times the price blows through the targets and just keeps going, so it’s entirely possible to capture a lot more points selling manually.
To summarize: The 10:00 economic news releases are a consideration and they have an effect on the outcomes of Alerts. I’ve seen enough of them that don’t have much effect on price to suggest it’s better in the long run to go ahead and trade Alerts that fill prior to the news.
Done for the Day Before Lunch
I’ve mentioned lots of times how the system is often “done for the day by lunchtime” and this is a good example of that. It’s also an example of an ideal day for the system and shows what real “momentum” looks like.
The thing to keep in mind is that there are different ways to play the Alerts. A 2 Contract trader that’s just shooting for the 2 Targets would have been done for the day at 10:00 (eastern) when T2 got hit. Once Target 2 gets hit the system isn’t going to issue any more Alerts that session. It will stay online and continue to trail the stop until eventually the price and the ratcheted Trailing Stop converge. In this case the price continued higher in the session.
Since we have no idea how the price action in any given session will manifest, it’s impossible to know which sessions will turn out to be “done before lunch” days. But they are fairly frequent and you’ll see plenty over a month or so. I’ve had people ask if this is primarily a morning system and the answer is “kind of” because the first Alert of the day usually comes in the first 15-20 minutes. But there are some sessions where the price takes its sweet time to work its way to the Targets. The market doesn’t always pick a direction right after the open and there are days where the first alert is a fake-out and the primary trend ends up going in the opposite direction. The majority of those will see T1 get hit and then price reverses – hit the trailing stop – and we get an alert in the opposite direction.
Everything revolves around how the price action unfolds on any given day and every day is different. The Momentum System doesn’t try to “predict” anything – it “reacts” to the price action as it unfolds in real-time.
Interesting Things On Deck for February
January turned out to be a good month for the ES / MES Momentum System and “seasonally speaking” it gets even better from here.
As we get into February I’ll be using this page to post commentary, notes and charts relating to our trading strategy and whatever else comes to mind. This “notes section” of the website isn’t intended to be a daily recap. It’s more of a way for me to be able to post educational material and examples of our trading strategy to help new and existing users make the most of our system.
Additional Useful Information
Moving Beyond the Trade Setup – Futures Trading Strategies to help Increase our Odds – In-Depth Article
January 2025 Commentary – Notes – Education – Examples
PowerEmini Day Trading Futures – Automated Alert Signals