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.
Max Stop Considerations
3/31/2025
The last trading day of March is a good example of things to think about when trading the Momentum System on high volatility days.
So today was a rare example of where the 18 point max stop worked out well on the first alert, but thwarted the trade on the second alert.
The first thing to consider is that today’s session was an pretty much of an outlier. We’ve seen a lot of intraday volatility lately and these aren’t really normal market conditions. The ATR’s were huge and the opening range was 23.50 points. Only one was session so far this year had a wider opening range.
So the first Alert was a short and hit the max stop pretty quickly. It was a case where there was a continuation move down from the pre-market, which reversed direction about 20-minutes into the session. That’s not uncommon and usually no big deal. The first alert of the day has a higher chance of hitting the stop because it generally occurs right near the beginning of the cash session.
Here’s an important point. In normal market conditions the initial stop always starts off 1-tick past the opposite side of the Range. That’s the ideal risk level and quants out best through most market conditions. During periods of extreme volatility we have to draw a line somewhere as far as a maximum stop and as I mentioned in a previous post, 18 points tested out best over several years of data.
Today, the opposite side of the Range was 36.75 points away from the Short Entry. The 18 point max stop was definitely preferable to risking -36.75 points.
When the 5-minute ATR’s are running 10-15-20+ points like today, there’s a higher chance that 18 points isn’t going to be enough “wiggle room” and the stop is going to get hit. That’s just measured in relation to the inherent volatility. It’s along the lines of what I’ve mentioned in the past about why we can’t use a 1-tick stop. The stop should be relative to the ATR’s and it’s highly unusual for 18 points to be too tight.
So it’s pretty incredible to think that the 18 point max stop was too tight for the second Alert. If the max stop had been 20.75 points, the second alert would not have hit the stop. And price went on to hit both Targets without us. T1 was 11.75 points and T2 was 39.50 points away from the Entry on the Long Alert.
Think about it like this. Over the years probably 95% of the time the max stop is not in play. The initial stop is typically way less than that. Only during extreme periods of volatility should we expect to see the max stop. That means it’s a high risk – high reward session.
Usually it’s not a big deal when the first alert hits the stop because that happens when there’s a fake-out directional move near the open that reverses. Typically we see price move in the opposite direction and hit the targets and it all evens out. But today since the ATR’s were so large, there wasn’t enough “wiggle room” for the price on that second Alert between the Entry and the initial stop. In other words, based on the size of the ATR’s, 18 points was too close. Imagine that.
Interestingly enough, the previous version of the software several years back didn’t have a max stop. So today the initial stop would have been on the opposite side of the range on both the alerts. The result would have been a -36.75 point stop out and then Both Targets getting hit for +51.25 points. Those are some scary big numbers and as I mentioned – not at all consistent with a normal market environment.
I took this screenshot when the Long Alert hit Target 1 (after the stop was already hit). Notice where the initial stops were in relation to the price action (marked short TS and Long TS).
It’s not the stop-out on the first Alert that sucks – it’s the fact that the max stop “thwarted” the second alert, which would have gone on to hit both targets and make up for it. Yesterday was a +36.00 point winner and we just have to accept the fact that during these high-volatility market conditions, the numbers get really big.
If these big numbers make you nervous there are several ways to deal with it. We have an in-depth section in the Help that goes into a lot of detail – “Trading the Momentum System in Volatile Markets”. There are several “tactics” explained on that page we can use to help minimize risk.
All in all the only thing out of the ordinary today was the fact that the max stop was too tight on the second Alert. If you’ve been trading the system for a while you know there are occasional sessions where the first alert hits the stop because the market reverses direction, but the second alert usually makes up for it. It’s highly unusual to see a session like today, but if you’re familiar with the system you know that it’s just one of those days where the price action didn’t unfold in a way that worked well for the system. But there will be plenty of days like yesterday where everything works out just fine.
On a positive note, April and May have historically been a couple of the best months for the system over the years. I believe it was April ’21 or ’22 where there was a streak of 18 Alerts in a row that hit Target 1. There were 38 alerts this month including today and 30 of them hit T1. That’s the most important metric for the system.
This is What An Ideal Session Looks Like
3/28/2025
The last Friday of March the market fell dramatically. The ES / MES Momentum System had one filled Alert and the market provided an ideal session for the system.
Both Targets got hit early in the day. Target 1 was 8.25 points from the Entry and Target 2 was 27.75 points away for a total of +36.00 points. It’s a coincidence that’s the same number as a max stop-out with 2 Contracts, since the Targets are based on the ATR’s in the pre-market and early session. There’s no limit on the distance to the Targets.
But the real action came after Target 2 got hit. The Trailing Stop continued to follow price down and never got hit the entire session. There were tons of Trailing stop moves and you can see where it ended up. At the close the Trailing Stop was 70.00 points below the Short Entry. The market actually closed 80.50 points below the Entry.
Today was an ideal session for the Momentum System. Not only did both Targets get hit in the first hour, the follow-through to the downside was huge. Unlike the choppy non-directional day yesterday, today the market served up a big trend day and the system was able to capitalize on it. It’s days like this where a “runner” Contract like I mentioned a while back would work out great.
All in all the month of March has turned out quite well for the system (there’s still one more trading day left on Monday). That’s the thing about a system like this where it has a built-in edge. There will be good days, bad days and breakeven days, but it all “quants out” to be profitable over time.
The good news is that April and May have historically been a couple of the best months for the system in the past. I guess it’s kind of a seasonal thing, but I’m looking forward to lots of good price action. The market environment has been pretty action-packed recently and we’re seeing lots of big moves and trends that get good follow-through. Sure there are some choppy and rough days, but overall this is a great trading environment.
The next couple months should be exciting.
I wanted to add something about the Trailing Stop movements from today. It was actually pretty amazing to see some of the automated Trailing Stop levels as price moved. There were several times where the TS ratcheted to what I’d consider the exact ideal level, especially after that counter-trend move around 11:45 where it looked like the market may have bottomed. I gave the System Notes to Claude ai and asked it to analyze the Trailing Stop moves and it provided this interesting table
There’s actually a lot of information that can be gleaned from this, but Claude came up with a few interesting snippets:
Risk Management Adaptation:
The system intelligently tightened protection as profit accumulated.
Early wider stops allowed breathing room during volatile market conditions.
Later tighter stops protected accumulated profits.
Market Trend Confirmation:
Continuous downward movement of trailing stops confirms persistent downtrend.
No instances of stop reversal indicates no significant counter-trend moves
System Efficiency:
The trailing stop moved a total of 78.75 points from its initial setting.
This represents significant profit protection compared to a fixed stop strategy.
The progressive tightening effectively “locked in” profits while allowing the trade to run.
This detailed analysis of the trailing stop movements reveals a well-designed system that adapts to changing market conditions while effectively balancing risk management with profit maximization.
Thank you Claude.
A Less Than Ideal Session – They Happen
3/27/2025
Every day can’t be a perfect day for the system. It’s just not the nature of the market. As I mentioned in a post a while back, traders can expect good days and bad days (and breakeven days).
As you can see on the chart, the price was all over the map and what I’d consider a choppy session. There was one good trend move up early in the cash session, but the system was sensing a breakdown right after the open and gave a short alert that got stopped-out. It was similar to yesterday as far as a fake-out move right after the open. If you think about it, the sooner we look to take a directional trade, the better the chance that’s not the actual direction the market will take.
One way to compensate for this is to trade a smaller size on the first Alert of the day. I talked about position sizing a bit yesterday and this idea is along those same lines. The main thing about today was that the max stop was in play due to the wide opening range and the early ATR’s. In the Help section there’s quite a bit about being defensive when the max stop is in play. The market had a 60-point range today and there were a lot of long-range candles.
So the thing that stands out about the second Alert is that the price made it about half-way to Target 2 initially and then stalled out. While Target 1 was 9.50 points away from the Entry, the price made it as far as +21.00 points above the Entry. It was within spitting distance of another Trailing Stop move, but the stop didn’t ratchet a second time on this Alert. That’s actually due to the fact the fill on the Alert was 4.75 points over the Alert price, so it needed to push just a wee bit higher for that TS to ratchet again.
But the point I wanted to make is this. You should always feel free to use a different stop than the system. At any point in time.
I’ve actually talked about this a lot in different places and speaking with users. But I haven’t really mentioned it here lately and it’s an important consideration in the exact scenario we saw today.
Here’s the gist. When the price gets in between T1 and T2 and the gain on the trade is say 12-15-20+ points, it’s a good idea to not let all those points slip away. The way to do that is to simply use a tighter stop than the system based on what you see on the chart. I know everyone hates to think about the idea of using a little discretion, but in some cases it makes sense.
Looking at the chart, you can see that the price basically stalled-out between 5770 and 5780 and spent 45 minutes chopping around in that area. To me it seemed like protecting the 5767-5766 level would have made the most sense based on the lows of the candles right up there around the first T1 level.
Every session is different, and how you would go about protecting gains by using a different stop than the system stop will vary. But the main thing I want to get across here is that anytime price gets half-way or more to T2 and the point gain is significant – it makes sense to protect some of those gains when the Trailing Stop is lagging way behind. Now if it’s one of those sessions where T1 is say 3.50 points and T2 is like 12 points, it’s not as important as when the market is experiencing wide ATR’s. I hope that makes sense.
Target 2 was 32.00 points over the Entry and the price only made it 21.00 points above the Entry. But those are some big numbers and protecting “some of the gains” when it was fairly obvious the price had stalled out seems reasonable.
If nothing else, it might have made sense to just set the stop at the Entry or even back at T1. The point is that while the system Trailing stop is calibrated to work under all sorts of different market environments, sometimes it’s not the ideal stop. It’s as universal as possible but there are occasions where using a tighter stop makes sense.
Keep in mind that over long periods of time the system will do just fine and it can be traded purely mechanically. But I always say that a user can do way better than the system but using just a tiny bit of discretion here and there based on what they see on the chart. Most traders use a lot of discretion all the time and most systems and services give a bunch of levels or zones and then it’s completely up to the trader on how to play them – and that’s very discretionary.
There are really only 2 main discretionary tactics for trading the Momentum System and those are position sizing and occasionally using a different stop. Which reminds me of something we mention in the Help about days where the max stop is in play. One of the discretionary ideas we mention in that case is to trade just 1 Contract and shoot for Target 1. I know that doesn’t sound exciting, but I mentioned “playing defense”. If a user took all 3 alerts today and used that strategy, today was just another “breakeven” day.
Early Session Reversal Example
3/26/2025
If you’ve been trading the Momentum System for a while you’re probably familiar with what transpired today. It was kind of a typical 2 Alert day other than the fact the first Alert didn’t quite make it to Target 1. It was interesting that the fill on the first Alert was 6-ticks past the Alert price and price came within 3-ticks of T1. But that’s no reason to change the Entry strategy. Over the long-run waiting for the 1-minute “confirmation” quants out best. I could write a long post about all that but I’ll save it for another time.
The point I wanted to make with this example is that over a long period of time, you’ll see quite a few days like today – where the price made a directional move shortly after the open, then reverses and the primary trend of the day is in the opposite direction. And today was a huge trend day down. The low of the day was -73.25 points below the Short entry. Target 2 was only 15.50 points below the Entry.
So here’s the thing. As you see on the chart, the initial Long Alert fired at a pretty reasonable breakout level based on the structure and the pre-market activity. It just didn’t have quite enough follow-through to make it to T1 and and hit the Trailing Stop (TS) just below the mid-point of the Range. Whether or not the reversal was caused by news is irrelevant. Sometimes the market picks a direction shortly after the open and never looks back. Other times it pretends like it wants to go one way, then decides to make a big move in the opposite direction.
Here’s the good news. You can expect that an Alert that hits both Targets will make up for an Alert that gets stopped-out. It’s usually close to a wash, but it can be a few points either way. Today turned out 4 points to the good, assuming one was trading 2 Contract on both Alerts.
But here’s something to think about. After what you see on the chart (I took the screenshot when T2 got hit) the low of the session was 5743.00 It was a BIG down day for the market. If any additional contracts were held past T2 it was a whole different picture. We talk a lot about holding “runners” and today was a good example of how things can turn out significantly different when trading multiple Contracts.
Scaling Contracts adds a whole different dimension to the system and honestly that’s one of the main discretionary aspects to trading the system. It doesn’t make sense for the software to tell you how many contracts to trade on each Alert. Everyone is at different levels and has different account sizes and quite frankly, we recommend adjusting the number of contracts you trade based on a whole host of things. Bottom line is that the number of Contracts you trade is a personal decision and beyond the scope of the system.
For simplicity sake, we use the 2 Contract basic strategy as the starting point. That assumes one trades 2 Contracts and just shoots for the 2 Targets. That’s fine and we highly recommend everyone start off at that level to get used to things and experience how the system works over various types of market sessions.
But at some point, the goal should be to trade enough Contracts to offer extra flexibility as far as scaling out. As an example, trading 3 Contracts today with the idea of selling one at each of the Targets and then holding the third Contract as a “runner”, the net result would have been a gain of +45.50 points and that’s including the initial stop-out. The runner would have hit the Trailing Stop at 5766.75 near the end of the session. And that Trailing Stop was 23.75 points above the low of the day.
There are an infinite number of ways to scale Contracts when trading the system.
There are pros and cons no matter how you decide to scale, and we know that every session isn’t going to present an opportunity to catch a move like today with a Runner. But it’s something to think about.
I’ll explore this topic more here in the future.
Market “Day Type” Examples
3/25/2025
The past 2 sessions provide a good example of what we mean by “day types” in the Help section of the Alert software.
As you know, the Momentum System simply “reacts” to the price action that unfolds each session. It does not try to predict anything. Traders have to trade whatever the market decides to serve up on any given day. Some days the market gives us great trending moves and other days it’s dull, choppy or non-directional.
So the past two days we got one of each:
For simplicity sake I just grabbed the daily candles of SPX for the past two days as an example of what we can expect from the system based on what the market served up. We have no control over what the market does at any given time so I wanted to reinforce the idea that the system is beholden to how the price action manifests in any given session.
Yesterday was an ideal day. The market opened and made a nice trending move higher right out of the gate. The system gave a Long Alert that hit both Targets quickly. Today was one of those non-trending zig-zag days where the price moved above and below the opening range zone and ended up with a Doji candle. There was no strong trend move in either direction.
So days like today are why the system is programmed to get trades to breakeven quickly when Target 1 gets hit. The market doesn’t give traders ideal trading days every session and breakeven days are just fine.
9 out of the last 10 Alerts Hit Target 1. 18 out of the last 20 Alerts hit Target 1. Once Target 1 is hit, the trade is essentially at breakeven and then it’s up to the market what happens next. By using this strategy we quickly reduce risk of a loss, and are positioned for big gains when the market serves up a good trend move – like yesterday.
Trading is a game of odds based on timing and tolerances and repetition. A crucial concept to keep in mind regardless of the exact approach you take in following the Momentum Breakout System is that the statistical edge is attained by taking many trades over time, i.e. we win over the series. The statistical edge reveals itself over a long series of trades and market sessions. Any one alert or day’s results is just random.
OPEX – A Good Session for the Momentum System
3/21/2025
Today capped off an interesting week. On Monday we had Contract Rollover. Wednesday was Fed Announcement Day. And today (Friday) was End of Quarter OPEX.
I started this new “blog” format with the idea that it would be helpful to new users. That’s because while the software is very easy to use, there’s a lot to the “system” that goes on behind the scenes. Many of the nuances aren’t necessarily apparent at first and it takes a while to pick up on everything. In other words, how the system reacts to the price action varies from day to day through various market conditions and environments.
Today was an ideal session to use as an example of a few of the little “nuances”.
1) Several Alerts fired off early and they never filled. They didn’t “trigger-in” because there was no 1-minute close past the Barrier / Alert Price.
2) The first Alert that did fill hit Target 1 and then the “ratcheted” Trailing Stop for a Breakeven trade.
3) The Targets were at different levels for each filled Alert – based on the Entry Confirmation (fill) price.
So on the chart you see I drew a white box around all the early session “noise”. This is where the system issued a few Alerts that never filled. You can see how choppy the price action was and it reinforces why we use the “1-minute close” Entry strategy. While not always perfect, it does frequently prevent trades from triggering-in when there’s no follow-through.
The next important consideration is how the first Long Alert that did fill hit Target 1 and then the “ratcheted” Trailing Stop and ended up as a “Breakeven” trade. I’ve written extensively on how breakeven trades fit into our strategy so I won’t get into all that here. But the thing to notice on the chart is how far price went back down after the tightened Trailing Stop was hit on the first Alert.
The price hit Target 1 for +7.00 Points and then subsequently reversed and pulled back -17.00 points from the Entry. It could have kept going lower. So taking a “scratch” trade is preferable to letting a winner turn into a loser and that’s why the Trailing Stop is designed to get trades to breakeven quickly – when T1 gets hit. In this case the trade was actually +1.75 points to the good.
The other interesting thing to note is the difference between the Targets on the 2 different filled Alerts. Since the “Entries” were different on each of the Alerts, the system calculated the Targets differently. While that should make sense, it’s just important to know that the stops and targets are calculated based off the Entry price and not the Alert price.
The green dashed line was the Alert Price and the thin green lines above it were the fill levels.
All in all it turned out to be a good week for the ES / MES Momentum system and it scored +98.00 points on the week (not counting commission). There were 9 filled Alerts. 7 of the 9 hit Target 1 and 4 of them 9 hit Target 2. It was another volatile week and price action was all over the map through most of the sessions. You can see more details below.
The Parabolic Stop Move Alert
3/20/2025
We don’t see it very often so I figured today was a good day to mention the Parabolic Stop move.
The Parabolic Stop move occurs when we see price momentum and trajectory accelerate very quickly to extremely Overbought/Oversold, i.e. unsustainable short-term levels. A trader can use the Parabolic Stop on their entire position to squeeze out final profits after a good run or use it as a protection level on a portion of the trade holding the remainder with the normal trailing stop. Parabolic Stops only get issued when market momentum is extreme.
Note that the Parabolic Stop move only shows up in the System Notes and when it gets hit it doesn’t close the open trade and reset the system. It’s just a good level to consider locking in some or all of the profits on any remaining Contracts held. Generally speaking there’s about a 50/50 chance the first Parabolic Stop will get hit. If price continues to move in the same direction there can be a series of Parabolic Stops show up and they typically appear just under the previous 5-minute low.
Here’s the chart of today’s session so you can see where the “Pstop” kicked-in.
As you see on the chart above, the Parabolic Stop alert occurred right after that 21.00 point long-range candle at 10:00. The Pstop level was 1-tick below the low of the following 5-minute candle and you can see it got tagged a couple candles later. It’s actually just a coincidence that the Parabolic Stop level ended up being at the exact same level as the final Trailing Stop that got hit to close the trade.
The price action today was wild and I included the pre-market just so we could see it. The down move in the pre-market and the up move in the cash session were roughly 80 points in both directions. Even more interesting is that we see the “W” pattern that I’ve discussed in other places over the years.
All in all it was a good day for the Momentum System. Target 1 was +9.00 points and Target 2 was +30.75 points and both got hit. One of the frequent complaints of traders is that they have trouble holding on to a position for BIG moves when they occur. Trading with a “targeting” system like this solves that problem because it helps remove emotions from the equation.
Fed Announcement Day
3/19/2025
Many traders prefer to sit on the sidelines on Fed Announcement Day for good reason. The market tends to be dull and choppy in early trading prior to the announcement. And then it goes haywire immediately following the announcement – even when the interest rate move was “exactly what was expected”. Then 30-minutes later Powell does a press conference and it’s anyone’s guess how the price reacts as he speaks.
I’ve always suggested it’s not a good idea to hold an open trade through the news, even if there’s an active alert. There’s just no edge and it’s a coin flip which direction the market goes initially. But a long time ago we decided to just let the software run on Fed day because it’s fun to see how the system reacts to the price action.
I marked up the chart a little differently today using Think or Swim.
You can see the results on the chart. While the first alert hit the stop, the second one came fairly close to T2 before pulling back to the “ratcheted” Trailing stop. Then the third Alert fired off immediately following the Fed announcement and hit both Targets.
The net result?
Sitting on the sidelines was the best strategy.
Serious Momentum
3/18/2025
You might wonder why we call our algo the “Momentum System”.
Think of Momentum as a similar concept as “inertia”. In other words, when the market breaks-out of a zone or starts trending in one direction, it has a tendency to continue in that direction – until acted upon by an opposing force. That opposing force is usually participants that step in when things get stretched too far in one direction.
The Momentum System assumes that once the buyers or sellers are able to break price out of the opening range area, there will be enough “follow-through” or “momentum” in that same direction to move the price to the first “easy to hit Target”. At which point the trade is at “breakeven”. On days like today where there’s good directional Momentum, price carries all the way to Target 2, which is always a significant distance from the entry.
Today was a perfect example of downside “Momentum” shortly after the cash open.
Look at how quickly everything transpired.
The price bounced around in a range for about 30 minutes prior to the cash open then the sellers stepped in big time and drove price down sharply. The system gave an Alert a minute and a half after it came online and that Alert filled a minute and a half later. Two minutes later it hit Target 1 and 30 minutes into the session the price hit Target 2.
A 2 Contract trader was “done for the day”. And that’s quite interesting if you saw how the price action played out the rest of the session. After what you see on the chart, the price literally chopped around sideways in a 20-30 point range for the rest of the day. The entire trend move for the day came in the first 30 minutes of trading and then it turned into a complete “untradeable” mess.
Strong trend moves tend to happen quickly and the more “momentum” the better. Today was a perfect example of that.
Risk Happens Fast – So Does Reward
3/14/2025
What a perfect way to cap off a crazy week in the market. Today’s price action exemplified everything I’ve been talking about here recently.
The ATR’s in early trading were HUGE. We got an Alert that filled on the very next 1-minute candle. 1-minute later it hit the first Target. Target 2 got hit quickly, just prior to the 10:00 economic news release (whew).
This example really reinforces what I said on the prior post yesterday (scroll down to read it).
In fast markets you have to be prepared to move fast. There was plenty of time to sell at both Targets, but it shows why you might not want to leave your desk during an open trade to get a cup of coffee – If you don’t have Sell orders already in place at the Targets.
At some point I’m going to do a post about the pros and cons of setting limit orders to sell as opposed to doing it manually, but for now I’ll say this. I firmly believe you must have a hard stop order in place at all times. And when the volatility is elevated (like it has been recently) it’s best to have Sell orders in place at the Targets too. They can be limit or “on touch” market orders, but the fact we saw ES move 31.50 points in one minute should make you realize that reaction times matter.
Speaking of capping off a crazy week…
The ES / MES Momentum System gave 7 Alerts this week and all 7 hit Target 1. Only 2 of those Alerts went on to hit Target 2, but all in all it was a good week and the net result was +60.50 points (excluding commissions). Based on the type of volatility I’ve been describing (scroll down to see) and the insane price action we’ve witnessed, I’ll call that a win.
Everything Happens Fast When the Volatility is Elevated
3/13/2025
I wanted to point out a couple observations and things to think about while this (likely transitory) period of extreme volatility persists.
I call this type of environment a “fast market”. I’ve written a lot about assessing the current market environment and adapting our trading to it, and use the phrases fast markets and slow markets frequently. In a fast market, price moves significantly in a short amount of time. You have to be on your toes. ES / MES can move 5-10-15+ points quickly and reaction times matter.
On the chart below I marked the ATR’s above the 5-minute candles for the first 30-minutes of the cash session for easy reference. When I say elevated volatility these significant ATR’s are what I’m talking about. Since the Alert Software / Momentum System runs in real-time you have to stay focused and realize that a lot can happen in a minute. (note the seconds on the time stamps)
There’s actually a lot to see on the chart and it’s a good example of several important points about trading the Momentum System.
1) MES and ES differ slightly when the market is extremely volatile. The system uses ES data for everything and it’s almost never an issue. But it’s possible once in a Blue Moon that a target or stop will get hit with ES and not MES. Just something I don’t mention frequently.
2) Notice there was a Long Alert that never filled. It’s important to understand the “Entry Trigger” (covered at length in the documentation).
3) This was the first session this week where the 18 point “max stop” wasn’t in play. The ATR’s were still huge but not as wide as the past few days.
4) The price “blew through” Target 1, which means in theory it would have been possible to capture more points than the Target – if you didn’t have the sell preset in your trading platform. (This is a subject I’m going to explore more in the future).
5) While there was plenty of time to react to the Trailing Stop moves and selling at the Targets, things still transpired quickly and there was no time for hesitation. The very next 5-minute candle hit the Aggressive Protection Level and the one after that hit the “Trailing Stop Move 2”. In the 20-minutes following what you see on the chart, the price was all the way back above 5600.
Things happen quickly in “fast markets” and the moves tend to be exaggerated. That’s just the type of environment we’re in. But based on all the years we’ve been doing this, we know that eventually things will settle back down and return to normal. Fast markets are better for trading than slow markets, but the middle ground is best.
Trading 2 Contracts and selling 1 at each Target netted +28.50 points (excluding commission).
You Have to Draw the Line Somewhere
3/12/2025
If you’ve already read all the posts below this might seem like a rehash – but there are a couple additional important points I want to make.
As you see on the chart below I added the 1-period ATR’s so we can see what the “low to high” ranges of each individual candle are. It’s a useful indicator because it provides a good gauge of current market conditions. I drew a horizontal line at 18 points for a reference point since that’s the “maximum stop distance” programmed in the ES / MES Momentum System. As I mentioned previously below, that’s the exact value that “quants out” best going back about 5-years through all sorts of various market environments.
So today once again the early session Alert hit Target 1 and then the “price volatility” resulted in the “ratcheted” Trailing Stop getting hit for essentially breakeven. Then once again the price proceeded to get to Target 2 (and then some). The initial stop started off at the 18 point max, but when Target 1 got hit the Trailing Stop tightened to just 10.75 points away from the Entry. That was roughly half of the average ATR’s since the cash open.
So basically this is a good demonstration of how a stop will get hit if it’s too tight. Some might consider a 10.75 point stop “not very tight at all”. But it’s all relative to the ATR’s. If your stop is just half of the average ATR, there’s a decent chance it’s going to get hit.
But the cornerstone of the Momentum System is that it attempts to get trades to breakeven quickly, and that’s what it did here. Target 1 got hit for +10.25 points and the Trailing Stop tightened -10.75 points away from the Entry (essentially breakeven). The system got the trade to safety so no matter what happened from there on, there was no risk of losing money.
But once an Alert hits T1 and the trade is at breakeven, then it’s up to Mr. Market what happens next. It just so happens with the elevated volatility and extreme ranges that the price snapped-back just enough to hit the Trailing Stop and knock us out of the trade. The good news is that there are plenty of times this doesn’t happen – and there are plenty of times where price reverses and we’re thrilled to close a trade at breakeven.
Remember, the system has winning trades, losing trades and breakeven trades. So instead of being a “binary event” (winner or loser) there’s only a 33.33% chance the “potential outcome” of any Alert is a losing trade. That “quants out”. Never get discouraged by a breakeven trade – better safe than sorry.
Some of the Choppiest Price Action You’ll Ever See
3/11/2025
The chart below shows the early price action on the 1-minute timeframe. When there’s an open trade we recommend following along on a 5-minute chart, but I wanted to zoom in on the 1-minute candles to show how hectic and “all over the map” the price action was in early trading. Just look at the ATR’s I have marked on the chart in the 3-minutes from 10:00 to 10:03.
“All over the map” barely even describes an almost 40 point ES range in the span of 3-minutes. That kind of price action makes for extremely dangerous trading. Things happen fast and there’s no telling what happens next. Random price moves of 10-20-30+ points have been the norm lately, which makes this a high-risk environment.
Needless to say the Momentum Systems “max stop” was in play once again and that’s been almost a daily occurrence lately. I like to say when the 18 point max stop is “in play” it makes sense to “play defense”. It’s no mystery that market volatility is extremely elevated and the price moves we’re seeing in the market intraday and on a daily basis are atypical. Every now and then the market enters these periods of high volatility and then eventually things settle down and get more back to normal.
During periods of extreme volatility when the price is whipsawing around both up and down, there’s more of a chance the Trailing Stop is going to get hit – just based on ranges of the price bars / candles. So in this example there were 3 filled Alerts and all 3 hit Target 1, but got knocked-out by the “ratcheted” Trailing Stop. That resulted in a “breakeven” day – which should be considered perfectly fine.
This is the type of price action that blows up accounts and the system navigated it well all things considered.
Trailing Stop Moves are a Double-Edged Sword
3/10/2025
As you know, one of the main concepts of the Momentum System is “getting a trade to breakeven” quickly. The system tightens the initial stop the moment Target 1 gets hit, and the trade is right around breakeven. Frequently the Trailing Stop will tighten prior to T1 getting hit, but that all depends on the “approach”.
But today is a good example of how sometimes the tightened Trailing Stop will get hit (or nicked) and the trade “would have worked” had the system not tightened it. It’s best to never second-guess things because at the point you see the Trailing stop got hit, the market could have easily continued higher. Since at any point in time we never know what the price will do next, the system is doing exactly what it’s supposed to do – protecting the trade at breakeven once T1 gets hit.
There are times where the “ratcheted” Trailing Stop gets hit and the price goes on to make a big move and hit Target 2. But over a long series of Alerts, it’s beneficial to protect the position and not let a profit turn into a loss. The system is simply “reacting” to the price action and there was 25.25 points of “traction” from the Entry to the low (prior to the TS getting hit). You can see that the system actually moved the Trailing stop to a reasonable level, but that counter-trend move was just significant enough to tag the Trailing Stop. It happens.
As you know, “breakeven trades” are a big part of our strategy and that’s just part of what makes everything “quant out” over a long series of Alerts.
Interestingly enough, the price action in NQ / MNQ manifested slightly differently and went on to hit both Targets for a total of +276.75 points. That counter-trend move that shook out ES had a lower high and that made all the difference.
Trading High Volatility “Range Expansion”
3/4/2025
It’s no mystery that the market volatility has picked up significantly and we’re seeing “range expansion” on every timeframe.
What that means is that during normal market conditions the ES / MES has 5-minute candles with an average range of roughly 3-6 or so points. Obviously the 5-minute ATR’s vary a lot throughout the cash session on any given day. Normally we see some 6-12 point “long-range” candles, but all this is a function of what I call “current market conditions”.
So the past couple weeks the market has been going through a period of “significant range expansion”.
You know I frequently discuss how we have to adapt our mindset to the current environment. As I’ve mentioned many times, it makes sense to also adapt our trading to compensate for current conditions. In other words we don’t approach a dull lazy Summer session the same way we’d trade after a Fed announcement, when price is swinging up and down in huge ranges.
It’s all about the ATR’s.
The Momentum system is designed to adapt to the price action that’s unfolding in today’s session. That way it adjusts to an ever-changing market environment.
When the ATR’s and ranges get really wide (range expansion) the distance to the Targets and the Trailing Stops get wide too. Recently we’ve seen the “max stop” in play more times than all last year. That alone is an indication of extreme volatility. So you have to adjust your thinking and expectations based on what the market is serving up at the time.
Just take a look at the 5-minute ATR’s at the beginning of today’s session:
(5-minute ATR’s from 9:25 to 10:30 am Eastern time)
15.50 9:25-9:30
18.50 9:30-9:35
18.00 9:35-9:40 (stop hit)
23.50 9:40-9:45
17.25 9:45-9:50
17.25 9:50-9:55
21.50 9:55-10:00 (T1 hit)
15.25 10:00-10:05
16.25 10:05-10:10
14.25 10:10-10:15 (T2 hit)
23.25 10:15-10:20
14.00 10:20-10:25
21.50 10:25-10:30
Those are some extremely wide ranges and definitely don’t fall into the category of “ordinary market conditions”.
They average out to 17.75 per 5-minute candle in the first half-hour. That’s actually interesting because the MES Momentum system uses an 18.00 point “max stop”. As I mentioned last month, we arrived at that number through detailed analysis and an 18 point max stop “quants out” best over long periods of time (years) through varying market conditions.
I’ve actually written quite a bit about adjusting for max stop conditions, but I just wanted to reiterate that we have to adjust our mindset too. In other words when the market enters these periods of significant range expansion we can’t think in terms of a couple / few points. In the first half hour of trading today, normal price fluctuation and random price movement could be considered 5-10 points. Price gyrated several points in the blink of an eye.
So these are what we call “high-risk / high-reward” conditions, meaning that the stops are going to be wider and the Targets WAY further away.
Typically when the max stop is in play Target 1 is in the vicinity of where it might normally be in more normal conditions. Today T1 was 9.25 points away from the Entry. Target 2 was a whopping 31.50 points from the Entry. Yesterday and Friday those numbers were even bigger.
So when the ATR’s get big, the rest of the numbers get big too. That’s just a function of compensating for market conditions – which is the ideal approach to trading the market (no matter what you’re doing).
What to Expect Here in March
February was a great month for the ES / MES Momentum System and “seasonally speaking” it gets even better from here. March, April and May have historically been some of the best months of the year for the Momentum System.
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 an ongoing “blog” where I post educational material, examples and insight into our trading strategy to help both new and existing users make the most of our system.
Be sure to check out the posts from January and February for interesting material and examples of the Momentum system in action. I always recommend that new users should start off slow and take time to experience how the system reacts to the price behavior through various market sessions over a period of time. Many of the previous posts will go a long way towards helping with that. While the system is simple to trade, it takes a while to truly appreciate how brilliantly constructed it is and how it adapts to various conditions. Many of the small nuances aren’t necessarily apparent at first and take time to reveal themselves.
Additional Useful Information
Moving Beyond the Trade Setup – Futures Trading Strategies to help Increase our Odds – In-Depth Article
February 2025 Commentary – Notes – Education – Examples
PowerEmini Day Trading Futures – Automated Alert Signals