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.
Using A Tighter Trailing Stop
5/27/2025
I mentioned last week that there are certain times when you might consider using a different Trailing Stop than the system. Today provided a great example of when it might make sense to do that.
Even though you could have traded the system “purely mechanically” today and done great (both targets hit for +39.75 points) it was pretty obvious that once Target 1 got hit, the Trailing Stop could have been moved to the Entry level. But here’s the important thing about that. It’s not because of any problem with the system or the level where it had the Trailing Stop. It was based on the specific candlestick pattern at the time.
Normally the Trailing stop is automatically at the ideal location. Remember, the system is designed so that once Target 1 gets hit, the Trailing Stop tightens so that the trade is sitting at breakeven. That’s what it’s programmed to do. But every now and then there is a particular situation where it would make sense to protect profits around T1.
On the chart below I drew a white rectangle around the price action starting with the 5-minute candle where Target 1 got hit. Notice the level of the Trailing Stop after T1 was hit. The white triangle encompasses almost an hour of trading where the Trailing stop remained at that same 5887.00 level.
So as price was consolidating around Target 1, the Trailing stop was “hanging back” around the breakeven level until the “forward momentum” finally picked back up. That’s where the upward sloping white arrow shows 5 additional “ratchets” of the Trailing Stop prior to Target 2 getting hit.
In a nutshell, it would have made perfect sense to use a tighter Trailing Stop in the latter part of that consolidation period. I think the best level would have been the exact Entry price. That’s just based on the candlestick pattern at the time – inside the white rectangle.
The reason I say that is because that we had a gain of +9.00 points at Target 1 and the price had basically stalled out there. So there were two choices (assuming trading 2 Contracts shooting for the 2 Targets). We could either let the price “potentially” reverse or drift back down all the way to the TS down there at 5887.00, in which case the trade would just be a breakeven. Or we could choose to move the Trailing stop to the Entry level at 5896.50 and even if the price reversed and hit it, we’d still have a +9.00 point gain on the trade.
At the time we had no way of knowing whether price would continue higher up towards T2. The only reason to even consider using a tighter trailing stop than the system was based on the 5-minute candles just after 11:00. Under normal circumstances there’s no reason to try and game the system and use a different trailing stop. Only in certain specific cases like this where an experienced trader can see that it makes more sense.
In the post below from last week I mentioned that at any point in time you can choose to use a different (tighter) trailing stop than the system, but I’d say in 90% of the cases that’s probably a bad idea. The system Trailing Stop is designed to hang back far enough to allow for normal price fluctuation and keep us in a trade through minor counter-trend moves. Only in specific cases like this would I recommend using a different stop than the system.
The system logic did exactly what it was supposed to do. Get the Trailing stop to breakeven once Target 1 got hit. If there had been more price action in between the Entry and Target 1 it would not have been advisable to use a tighter Trailing Stop. But this was one of those rare times where it seemed like a good idea. Right?
Memorial Day Weekend – lots of Interesting stuff
5/23/2025
Today was a good way to cap off the week. I haven’t posted since Monday even though I’ve had a few things on my mind to talk about here. But I decided to wait until the end of the trading week since we’re headed into a 3-day weekend. I figured I would throw everything I’ve been pondering into this post. Plus there’s plenty of extra time to update and add to it over the long weekend.
I’ve actually been working on a new “presentation” that’s going to be one of my finest works. I have a lot of time into it already but you don’t write a novel in a few days. I’ll probably start off with an in-depth article and then turn that into an actual presentation and then a video. I’m not going to get into it here, but it’s about using “scientific and mathematic” principles in trading. The title I’m thinking of is something like “Trading Based on Laws of Physics” or Laws of Nature, or something like that. I’ve devoted most of my writing time this week to working on that.
This past week the Momentum System gave 9 Alerts and 3 hit the stop, 6 hit Target 1 and two alerts went on to hit Target 2. Trading every Alert exactly like the system resulted in a wee bit better than breakeven, but there were a lot of opportunities to use a little discretion and do way better than that. I know some people hate idea of having to make any decisions and want to just trade a system purely mechanically. And that worked out ok. It was a profitable week.
But today was an example of what it means when I say you can do WAY better than the system by just using a little judgement at certain times.
In a nutshell, the price came within 2.00 points of Target 2 but didn’t quite make it. Target 2 was a whopping 35.75 points away from the Entry on the Long Alert. The price only made it to +33.75 points then ran out of steam and rolled over in the last hour of trading. It finally tagged the Trailing Stop for a mere +13.00 point gain.
So trading 2 contracts and shooting for the 2 Targets would have resulted in a +10.50 point gain at Target 1 and a +13.00 point gain at the Trailed Stop. A lot of the potential profit up near T2 was given back, but we have to understand that the level where the Trailing Stop got hit was based on the chart pattern. That’s how the system works. It doesn’t care about points, it’s maintaining the Trailing stop at the most logical level at any given point in time.
But here’s an important thing to point out. At any point in time you can choose to use a different stop level than the current system Trailing Stop.
The Trailing Stop is calibrated so that it attempts to stay in a trade through normal price fluctuation and minor counter-trend moves. If the ATR’s are wide, then a normal counter-trend move might consist of significant points. Also once Target 1 gets hit and a counter-trend move occurs, if / when the primary trend resumes the system looks to tuck the Trailing Stop just above or below the most recent pivot high or low depending on whether it’s a Long or Short.
Let’s take a look at how the Trailing Stop evolved today. It was actually a really interesting session because of the huge drop in pre-market. I wanted to include that on the chart because it’s relevant to various levels in the cash session and how things played out.
I took that screenshot right after Target 1 got hit and the price made a “counter-trend” move. You can see how price came fairly close to that first Trailing stop move there at 5798.50 but didn’t hit it. That was a well placed stop move. The other thing to note is that the max initial stop was in play due to the wide ATR’s. Notice the scale of the chart is in 10 point increments.
The pattern itself is also interesting because it shows how the system waited until most of the price action was occurring above the Range high to take the Entry. The Entry didn’t trigger-in until 10:13. The first pullback came close to the initial stop which was the 18 point “max stop”. If we had chosen to set the max stop at say 10,12 or 14 points it would have been hit. I’ve mentioned we did a lot of testing to arrive at that 18 point value and this is a perfect example why. We didn’t get knocked-out of the trade and the price came within 2 points of Target 2 later in the session.
Here’s what the chart looked like when the Trailing stop eventually got hit about a half-hour before the close I marked the final trailing stop level and circled where the trade got closed.
The important thing is to realize that final Trailing Stop level was based on the candle pattern and didn’t have anything to do with how many points the price was off the high. As you see, the Trailing Stop had tightened to the point where it was tucked up just under the lows from the 1:45 candle. That also coincided with the lows of a few candles that came later and then it finally got hit where I drew the circle.
So the question is whether that was a good place for the Trailing Stop at the time? I’d say yes because even though it was giving back a significant amount of points, it was placed based on the market structure at the time, and that’s what’s important. Candlestick patterns and prior lows look the same no matter what the ATR’s or ranges of the candles are. I hope that makes sense.
One other thing about this Alert that’s more of a coincidence than anything. The fill on the Alert was exactly 3.00 points past the Alert Price and as you know the Targets are calculated based on the Entry / fill price and not the Alert price. So if by chance the order had filled just one or two ticks past the Alert price it would have hit T2. It’s amazing that the high of the day turned out to be just 1-tick past the highs of that little pre-market congestion area. Coincidence? Of course.
That was an obvious level of resistance so it might have made sense to close the trade there – if one were using a little discretion.
My final point is this. At any point in time you are free to decide to use a different trailing stop level than the system. It does a good job by itself, but you have that option. As mentioned here and in the documentation, when price gets sandwiched in between T1 and T2 and especially if it gets really close to T2, that’s where you might consider using a discretionary trailing stop. In this case, since it was so close to the market close, it might have made sense to be a little more aggressive with the stop and protect more of the profits. After that rejection off the pre-market highs and the following candle that came close to the trailing stop, the next bounce somewhere around 5835.00 might have been a good location to just say “good enough”.
Understanding the System Notes
5/19/2025
A new user emailed me today and had a couple questions about the System Notes and why the system was still online after both Targets got hit. While the Alert Software is super simple to trade with, it can take a few sessions to get the hang of everything. Honestly most users have it mastered after about a week of observing it in action and going over the help.
I thought it would be a good day to do a review on reading the System Notes since everything was so cut and dry today. Basically the System Notes in the lower section of the Alert Software provide a real-time play-by-play of everything that transpires throughout the session. They update in real-time and provide everything you need to trade along with the Alerts no matter what broker or platform you’re using.
Here’s a screenshot of the Alert Software I took this morning shortly after Target 2 got hit. While everything seems fairly self-explanatory to me, I can see where it could be a bit confusing to a new user on Day 1 so I made notes next to each “event”.
Always read the System Notes from the bottom up. Everything is in sequence and new events get appended from the top down as the session unfolds.
Before I go over the sequence of events, I wanted to point out 2 things. First, notice in the very bottom right corner of the Alert Software there’s a “timer” that shows your current time. It counts the “seconds” so you know exactly when a 1-minute candle is about to close. The system uses a 1-minute close for the Entry (fill) and this is a very useful feature for knowing exactly when to pull the trigger and enter a trade.
Reading from the bottom up, the very first line shows the day and date, but more importantly, the Contract the system is trading. This is especially useful around Contract Rollover so you know when the system rolls over to the new Contract.
Once the cash session opens, the system comes online and assesses the opening range. At 9:35 (eastern) it prints the high and low of that range to be used as a visual reference point and a balance point to identify directional price movement. Keep in mind that a simple breakout of that range does not trigger an Alert. Only after price escapes that range does the system start looking for a potential entry point.
You can see at 9:38 the system fired a Long Alert at 5929.75 which was 2.75 points over the range high. Some sessions there’s an Alert shortly after the system comes online and other days it can take a while, depending on the price action. The system simply reacts to the price movement as it unfolds in real-time. Typically there will be an alert in the first 15-minutes of the cash session. It’s attempting to get in early near the start of a potential significant trend.
At 9:40 you can see that this Alert “triggered-in” at 5930.50. The “Entry Confirmation” line shows where the system got “filled” on an Alert that triggered-in. In this case it was 3-ticks past the Alert price. The “Entry Confirmation” occurs when there’s a 1-minute closing candle past the Alert price. Sometimes the fill is a couple / few ticks past and sometimes it’s a couple / few points. It doesn’t matter because the Targets are based on the Entry price. Some days any slippage that occurs will work in your favor and it all evens out over the long run.
As soon as the Entry Confirmation line prints it shows the initial stop and prints another line with the 2 Targets. At this point you’re in the trade (just place a market order) and know where to place your stop, and where you will look to take profits at each of the Targets. There’s no ambiguity to it.
Four minutes after the Alert triggered-in at 9:44 you can see the initial stop “ratcheted” and tightened up as price approached Target 1. Some sessions the Trailing stop will tighten prior to T1 getting hit and others it will wait until after T1 gets hit. That depends on the “approach” to the Target as far as price action.
The next “event” was Target 1 getting hit at 9:47:45, just a few minutes later. Notice that as soon as Target 1 got hit the Trailing stop tightened again. That’s why the time stamp is the exact same. The important thing to note is that when T1 got hit, the Trailing Stop had the trade at “breakeven”. At that point there was no risk of a loss assuming you were trading 2 Contracts and looking to sell a Contract at each of the 2 Targets. At that juncture even if price reversed and went back to hit the new Trailing Stop, the trade was a couple points to the good.
At 9:47 and 10:02 the Trailing Stop tightened again as price got closer to Target 2. Just 20-seconds later Target 2 got hit +23.50 points past the Entry. Trading 2 Contracts resulted in a +30.50 point gain assuming selling 1 Contract at T1 +7.00 points and selling the other at T2 +23.50 points.
At that point, 32-minutes into the cash session a 2 Contract trader was “done for the day”.
However the system stays active and continues to keep the trade open until the (continually tightening) Trailing Stop eventually gets hit. This is because there are plenty of session (like today) where the price goes well past Target 2 and it’s possible (and desirable) to catch what we call a “runner”. In other words a trader trading more than 2 Contracts has the option of selling at the Targets and holding an additions Contract(s) for an even bigger move.
So the Trailing stop will continue to tighten and preserve gains well past Target 2. Today the Trailing Stop finally got hit at 3:25 in the afternoon at 5966.50. That was +36.75 points over the Entry and an additional +12.50 points past T2. And that’s after the price pulled back. The actual “traction” (max excursion past the Entry) was 57.75 points later in the day.
Keep in mind that at any time a user is free to use a different stop than the system. However the system is programmed to keep an optimal distance between the current price and the Trailing stop so that it’s able to stay with a trend move as long as it persists.
The last thing from the screenshot is the “Traction” indicator I have circled in the upper section of the Alert Software. This simply shows the max excursion past the Alert Price in both directions. In other words at the time I took this screenshot the trade took -0.50 points of “heat” and had also moved as much as +35.00 points in the direction of the Alert.
If you’re a current user and reading this was basically just a review of the System Notes that you’re already familiar with. But hopefully this helps clear up any confusion on the part of new users or prospective users. The System Notes are an integral part of the system and quite honestly all you need to trade along with the signals. They provide EXACT specific numbers and not just zones or levels like other systems.
The final thing I wanted to mention is this. Sure you might have been watching the market near the open today and thought about getting in Long as price basically took off from the open. But it’s beneficial to have an actual trading system giving you the go-ahead and confirming the Momentum. Even if you discretionarily decided to take a Long trade, sometimes it’s tough to stick with it and know where to take profits. The Momentum System gives you the benefit of “structure” and helps keep you in for significant moves like today. It can be traded in any number of different ways and I’ll go into that in more detail in a future post.
Just so we can visualize everything above, here’s the 5-minute chart of today’s cash session with the pertinent levels marked.
That opening drive had some serious “momentum”. Ideal price action for the system.
You Never Know What Happens Next
5/15/2025
I’ve been posting here every couple / few days since the beginning of the year. That’s a lot of reading and I wouldn’t expect too many people to spend that much time going over it all. That’s why I tend to bring up topics that may have been previously mentioned, but often just in passing. Today I wanted to elaborate on a couple concepts I’ve mentioned before.
When you are watching the price action unfold in real-time, you never honestly know what’s going to happen next
As mentioned before, as chart watchers and technical analysis masters it’s easy in hindsight to assume you would have traded the chart just right. But let’s be honest with ourselves. In the heat of battle when the price action is unfolding, sometimes we think we know where price is headed or how things might unfold – but we really don’t.
Today was a great example of that. The early price action was choppy and all over the map. It was basically range-bound and looked like it was going to be one of those directionless days.
Look at this chart early in the session and pretend you didn’t know how things turned out today. Assume you were trying to decide how you might play what you see here.
Given the fact that every time price moved to the upper-end of the range it reversed back down to the lower-end of the range, it seemed like there might be a good shorting opportunity setting up. Or at least a fade back down just based on the patterns.
The Momentum System was signaling a Long trade at the green dashed line, and it filled at the level you see on the chart below. Quite frankly based on the big green candle and how price faded back down after the previous big green candles, it seemed like a bad place to get filled on a Long trade.
Add in the fact that the very next 5-minute candle was red and had that wick on top, it sure seemed like a reversal back down was in the cards. At least that’s what it looked like to me at the time. It looked “ominous” to be in a Long trade given the pattern in the prior price action.
Be honest. Pretend that there were no lines on the chart above and just look at the price action and imagine what you would have been thinking would happen next. Personally, looking at that chart objectively I would have guessed the next move would likely be lower and just under that “ominous” red candle might have been a good spot to take a short trade.
That’s just how it looked. As traders we are trained to recognize patterns on the chart and use the price action as our guide. Given the fact that each time price tried to rally it got turned back (significantly) it made sense to expect another down move. If anything, it might have made one nervous as hell to be long at that juncture.
Or maybe I have it all wrong. Maybe you looked at the chart above and thought to yourself “that’s a solid breakout, I’m expecting price to move higher”. That’s exactly what the Momentum System was thinking
Well not really. It doesn’t actually think or try to anticipate moves. It doesn’t attempt to predict anything. It simply reacts to the price action and identifies levels where the price can “break-out” of a trading range and make a directional move.
I like to describe the system logic as a sort of “law of nature”. It’s indisputable that IF the price was going to make a significant move higher, it had to pass through that Long Alert level on the way. And we’d want to be on board for that. The system attempts to find optimal breakout levels where the price can break free of “congestion” and make a directional trend move.
And that’s exactly what happened.
As much as I hate to admit it, when I’m watching the price action unfold day to day in real-time, I honestly don’t know what’s going to happen next. Sure I have an idea of where price might be headed based on years of experience reading charts and candlestick patterns and using indicators. But with the pure “randomness” of the market and frequent price moves out of nowhere if I’m honest with myself, I accept the fact that “what I’m thinking happens next” is just a good guess.
Fast-forward to how this Long Alert played out
It was a Range Breakout indeed. The move higher got way more “traction” that I would have expected and as you can see on that last chart, price hit both Targets and made a trend move 41.00 points higher past the Long Alert price.
And the interesting thing was that there were 3 different areas (marked on the chart) where I thought the move higher might be over. That’s just what it looked like at the time based on the price action as it was “unfolding”. You can see I took this screenshot right after the high of the day and about an hour later the price came back down and hit the “tightened trailing stop”.
But the point of this post is that I’m a system trader. I trust the system and I know for a fact that IF the price is going to make a significant trend move, it’s going to pass through an Alert level and through the Targets on the way from point A to point B. There’s no denying that as a law of nature and I know for a fact that the market frequently makes big trend moves.
The trend is your friend – don’t fight the trend and all that…
It doesn’t always work out and there are plenty of fake-out moves and stop-outs over time, but the system is designed to avoid “price congestion” and get us into large directional trend moves. As you know there’s a lot more to it as far as the stops and targets and nuances of the strategy. But quite honestly, using a system like this is so much better than trading based on “what you think might happen next”.
The Importance of Horizontal Levels
5/14/2025
Whether you’re trading the Momentum system purely mechanically or using some discretion, don’t discount the importance of the various “levels” the software generates. This post should be useful to users that are on NinjaTrader and have the “companion indicator” as well as users that are on different platforms and just using the stand-alone Alert software.
Many sessions it’s uncanny how all the various horizontal levels line up with the bigger picture market structure. The levels the software generates can provide a lot of insight into the current price action and can be used in all sorts of ways. While the Ninja “companion indicator” plots some of the levels on the chart automatically, it doesn’t “save” anything as the horizontal lines are generated in real-time. They disappear and move at various times and that’s why it’s useful to plot them manually.
When the system goes offline like when it’s done for the day, the levels can still be useful.
There are actually several reasons why it makes sense to plot the levels. By now you’ve seen how I plot them on all the chart examples on this blog. I’ve only had to place the lines on my chart once and each session I just move them to the appropriate locations, which only take a few seconds.
Plot the Trigger Range
This is actually the most important thing to plot on your chart because the Trigger Range is the main “visual reference point” for everything that happens. In order for the software to generate a new Alert, the price has to be inside the Range and break out of it one direction or the other. If we didn’t have that visual reference we’d be like flying blind. The software would just generate an Alert out of the blue and there would be no way to know how or why an alert fired off. We’d be sitting around staring at the chart wondering if and when there might be an Alert and then all of a sudden one would fire off and tend to catch us off guard. You definitely want the Trigger Range plotted on your chart.
As you know and as you see on the chart below, it’s not just a breakout of the range that gets us into a trade. The Range is simply there to provide structure that helps identify a potential directional move. In other words, if and when the market is going to make a directional trend move, the price is going to escape the Trigger Range. It’s like a law of physics.
Plot both the Long and Short Trade Price Barriers
The actual Alert Price (Trade Price Barrier) is always outside the Trigger Range and will appear at various distances past the high or low of the Trigger range depending on the market structure and current price action. Some sessions there are both Long and Short Alerts and you’ll want to place a horizontal line at the Alert prices too so you know the “level to beat” for an Alert to actually fill.
If you’re using the Ninja indicator, you know it only shows the current Alert level. So like today, there was a Long Alert that never filled and then when the system flipped to a Short Alert, only the Alert level for the Short was visible on the chart. That’s why I plotted the Green dashed horizontal line you see on the chart below. In the event the market turned higher later in the session, I’ll know where to expect a Long Alert for a breakout to the upside.
Plot Both Targets for a Filled Alert
Another good reason to plot the levels is that only the current upcoming Target shows on the chart. That’s because Target 2 is typically so far away from the current price action when an alert triggers-in that we don’t want the scale of the chart to get skewed. When an Alert fills, Target 1 is visible on the chart and is usually close enough to the current price that you don’t have to squeeze your chart down to see it. Marking both T1 and T2 on the chart is also useful because after T1 gets hit the horizontal Target Line moves to the T2 location.
Plot the Trailing Stop
As you know, when you place a trade most platforms place horizontal lines or markers at the pertinent levels. Your Entry, Stop and Targets will show up as lines on the chart during an active trade. But it’s still extremely useful to have the levels the software provides plotted on the chart too. Once a trade is over you still want to be able to see where all the important levels are.
The Trailing Stop is dynamic and adjusts frequently. I just plot one yellow line on the chart for the initial stop / trailing stop and adjust it based on what the software is showing at the time. You’ve seen sessions where the Trailing stop tightens a dozen times or more so it makes sense to just have one line and adjust it accordingly. On days where there’s both a Long and Short (filled) Alert I usually have a separate Trailing Stop line for each of them.
So here’s today’s chart that shows why it’s not only useful to plot all the levels, but also useful in seeing the bigger picture market structure.
There’s a lot to see looking from left to right, but notice how a lot of the pre-market action also lines up with the levels generated by the software after the cash open. Notice how the Trigger range encompasses the pre-market price action and notice how the Alert Levels form outer boundaries above and below the Trigger Range.
Notice the Long Alert level at the top of the chart (green dashed line). IF the market had decided to break-out to the upside today it would have had to pierce that level and the trigger for a fill would have been a 1-minute close past that level (which didn’t happen obviously). But what you don’t see on the chart is the prior highs from the overnight session that basically coincided with that “upside breakout level”. In other words there’s a larger timeframe market structure that’s relevant to where the system would have taken a Long if the price had decided to trend higher.
Note that the Alert Price levels remain the same all session once they’re generated. They are also useful “visual reference point” and it makes sense to have them marked too.
For instance later in today’s session, after both Targets got hit and price tagged the Trailing Stop, there was another Short opportunity at the exact same levels as the original Short Alert. It’s totally viable to discretionarily take trades (during the cash session) based on the generated levels even if the system is offline. The logic of the system is programmed so that when an Alert hits both Targets and price eventually tags the (ratcheted) Trailing Stop, the system goes offline for the rest of the session. We explain why that’s a good strategy in the Help, but there are certain times where it may be feasible to take another trade based on the exact same parameters as a prior Alert.
The chart above shows the early Short Alert from this morning and over on the right you can see where the Trailing Stop eventually got hit and the system went offline. But the chart below shows that there was a similar Short setup that went on to hit both Targets again.
Now I’m not saying you’d necessarily want to take additional trades every day, but there are times when the market presents opportunities at the same levels as the software generated earlier in the session. For instance there are days where T1 gets hit and then price tags the Trailing Stop and it’s possible to take another shot at it even if the software doesn’t give another Alert.
As I’ve mentioned here previously, in the situation above the system logic is programmed so that the price has to retrace back up past the mid-point of the range and actually have a 1-minunte close in that area in order for the software to fire a new Alert in the same direction. Without going into why it’s programmed that way, there are times where it’s perfectly feasible to discretionarily take another shot at it. Honestly there are days where the Entry level serves up multiple opportunities to take a trade just targeting T1. Today was a bit unusual because typically once an Alert hits both Targets and the system goes offline, the price is usually a large enough distance away from the Range that there wouldn’t be another opportunity to trade at the same levels as earlier.
But I wanted to point out the flexibility of the system. And the usefulness of the levels for discretionary trading.
I almost hesitated to post the section about taking discretionary trades because I know that the majority of users prefer to trade the Momentum System “purely mechanically” and that’s fine too. I originally started this post based on the idea that that “system levels” often line up perfectly with the current market structure even though they aren’t generated until the price action in the cash session unfolds.
But we see a lot of sessions where the levels could be used for discretionary trading and the idea of the software being a great “tool” that can be used in various capacities is perfectly legitimate. Honestly we believe a combination of systematic and discretionary trading is probably the best overall approach. I talk a lot about using “just a little discretion” here and there to improve results and there are certain times where the system levels could indeed be very useful.
I do want to mention another important point. On a day like today the since there was no “filled” Long Alert, the system didn’t provide Entry or Target levels to the Long side. Here’s a screenshot of the Alert Software that shows what transpired while the system was still online.
So in theory the only thing we had to go by was the original Long “trade price barrier”. In the event the market had broken out to the upside after the system was offline, we’d have to choose levels for upside Targets (and stops) based on what we see on the chart. For this reason and several others I recommend that users “stick to the plan” for the most part and not try and get too fancy with taking discretionary trades outside of the actual alerts. The Momentum System is programmed to win over the long series of Alerts and can indeed be traded purely mechanically. However it is flexible and some traders might also find the “system levels” to be a useful tool in their trading arsenal.
Finally, A Perfectly Normal Session
5/13/2025
Other than the unusual pre-market candle when the CPI numbers were released, today was what I’d call a perfectly normal session. Reminds me of the good old days when the market wasn’t so insanely volatile.
What made today one of the more normal sessions we’ve seen in a while? Well, all the numbers are in line with what we’ve seen over the past few years prior to the extreme volatility created by all the “tariff news”.
The opening 5-minute range was 8.00 points. Target 1 was 4.75 points and Target 2 was 16.25 points. Both Targets got hit for a total of +21.00 points.
That’s all about normal if you averaged everything out over the past few years. What’s more, the “fill” on the Long alert was just 2-ticks over the Alert price which is better than some of the fills when the ATR’s were abnormally wide.
Notice the “consolidation zone” I have outlined on the chart.
So basically the price consolidated for about an hour following the CPI release and then started breaking out to the upside when they rang the opening bell and the cash session started. It’s interesting to see how that CPI “news spike” kind of foreshadowed the subsequent directional move even though most of the wick on that candle transpired in just 1-minute.
But back to why this was one of the more normal sessions we’ve seen in a while. For one thing, the initial stop was 12.75 points away from the Entry, so the “max stop” wasn’t in play. I’ve mentioned it before but anytime you see the 18 point max stop, it’s NOT a normal session. Over the years we can go months at a time and never see the max initial stop on an Alert. Some years we’ve only seen it appear a few times in an entire year of trading. That just goes to show how unusually volatile the recent environment has been.
The most interesting thing I wanted to point out on that chart is where the Trailing Stop level was located at the time I took the screenshot (just before lunchtime). The Trailing Stop had tightened up several times prior to that, but once that Pivot Low was in place and price started moving back up, the system tucked the Trailing Stop up there just 1-point under the pivot low where I have it marked. That’s kind of cool the way it works like that.
Anyway, I said this a while back. These periods of extreme volatility are typically short-lived. This particular go-round has already lasted way longer than usual, but I expect we will start to see volatility subside and the price action return to more normal ATR’s and ranges. And that will be ideal for the system because it won’t be as much of a high-risk environment. The max stop won’t be in play and the price action will return to more normal market conditions. The distances to the stops and targets will be similar to today.
The toughest trading environments are when the market is either too volatile or too dull. Today was just right.
Another Unusual Day
5/12/2025
We knew today was going to be a strange one because of the huge move from Friday’s close to today’s cash open. And as I discussed Friday, it was all about the “news event” of progress in trade talks. So the cash open today was about 166 ES points higher than Friday’s close which translated to about a 2% gap-up for the S&P. That’s pretty significant and typically means the following intraday price action is suspect.
Huge overnight moves like that tend to get faded and the opening 5-minute candle in the MES cash session did exactly that. There was some follow-through in the first hour of trading but the max stop knocked-out the first Short Alert trade by just a tick under 2 points. In other words if the max stop was 20 points the Alert would have hit the first target. But I’ve talked a lot in the past about drawing the line somewhere and even with the elevated volatility and much bigger ATR’s we’ve been seeing I still believe the current max stop is optimal based on a large sample size of testing.
Here’s a look at the chart.
While the morning was pretty choppy, that mid-day rally back up near the highs proved the buyers were still in control. As the price started poking at the previous overnight highs, the system gave a Long Alert at what was basically a resistance level. You can see on the chart that price spent the next couple hours trading essentially sideways and then there was a huge rally right at the end of the day.
That was the strange part. The 3 big green candles right at the end of the day came out of nowhere, especially given the fact the market got really boring during that consolidation. I guess you could chalk it up to short covering OR a big buyer stepped in. The funny thing was that the market closed at 4:00 about 5.25 points above the Long entry, but 2 minutes later price actually hit Target 1. It’s not unusual to see these type of late-day rallies but that was about a 30 point move from low to high in those three candles.
That end of day rally helped offset some of the early stop-out, but it wasn’t really an ideal day for the system. I kind of expected that given the overnight price action.
So basically today was a “repricing” of the market based on the perceived good news that progress is being made in trade talks with China. As I mentioned Friday, news driven markets are tricky. Price can turn on a dime and the price action can be inconsistent and erratic. But as you know, the system doesn’t care about news, it just monitors the price action that’s unfolding and reacts to the movements.
A News Driven Market
5/9/2025
This past week was strange given the fact almost every significant move was based on a “news event”. And of course the Fed interest rate announcement this past Wednesday (and subsequent Powell press conference) always makes for erratic price action. I was going to post something about avoiding trading on Fed Day, but that’s mentioned in other places and honestly most traders avoid trading over the Fed announcement anyway.
But the real “noise” in the market this past week revolved around all the tariff news. It’s like 2018 all over again.
It’s like no matter what is unfolding at the time in the market, at any moment a comment by the Administration regarding tariffs can instantly cause a price reversal or send price soaring in one direction or the other. And then there are the rumors…
It all basically added up to a weird week and lots of choppy price action. The ATR’s on the intraday timeframe are still considerably high, but not nearly as crazy as last month. The VIX has come down a lot and that’s consistent with the intraday ranges beginning to tighten up.
Excluding Fed day there were a couple stop outs and a couple Target 2 winners and the other Alerts hit T1 for basically a nothing week. It’s interesting to see the weekly candle was a Doji too with longs wicks above and below but essentially unchanged from the weeks open. It just seemed like there was a lot of “noise” all week and market conditions weren’t all that great due to a lot of erratic intraday price action.
But that’s just the way it goes. Most traders don’t like to admit it or maybe they don’t think much about it, but we’re all beholden to “market conditions”. I’ve talked a lot about this in other places but the main point is that we have to trade what the market serves up from day to day. And sometimes the market doesn’t always respect the basic laws of technical analysis. Especially in a news driven market.
We saw several times this past week where the price almost made it to a target but didn’t quite make it. We saw an Alert that came within spitting distance of T2 but reversed and hit the Trailing stop. We saw an Alert that hit the (tightened) Trailing Stop to the tick and then went on to hit T2. And we saw a few Alerts that hit T1 but didn’t get much follow-through. The week did finally end on a strong note with a T2 winner, but all in all it was like treading water.
With the Fed out of the way maybe next week things can begin to return more to normal. As I mentioned, the ATR’s are starting to come in a bit and that’s probably a good thing. But there’s the looming “trade talks with China” so we’re probably looking at more “news events” hitting the tape early next week.
The system actually doesn’t care about the news at all. It simply reacts to how the price action unfolds in real-time. But the news does have a big affect on how the price action unfolds and as we’ve seen recently, price can turn on a dime. The good news is that while the system experiences periods where it just seems to spin its wheels, over the long run things always work out just fine.
An Unusually Choppy Start to the Week
5/5/2025
I usually post these “notes” later in the day – most times after the close. That way we know how the session played out and it makes for a more useful “forensic analysis”. But this morning we saw some unusually choppy price action and I thought there were a couple useful items to note, especially for new users.
I also usually post 5-minute charts here because that’s the recommended timeframe to follow along with a Momentum trade once it has triggered-in on the 1-minute chart. But today the notable items are more obvious on the 1-minute chart.
The first thing you see is just how choppy the price action was in early trading. The 1-minute candles show how “all over the map” price was prior to 10:00 Eastern. Notice that the system initially gave a Long alert then a Short alert and neither of those triggered-in or “filled”. That’s because there was no “1-minute CLOSE PAST the Alert price (trade price barrier). That’s an important point and probably the #1 thing a new user needs to know as far as how the system takes an Entry. If you’re new to the system be sure to go over the page about How to Take the Entry in the Help.
So you see on the chart below the Red dashed line is the Short “trade price barrier” and the Green dashed line is the Long “trade price barrier”. Notice how they form sort of an outer range or envelope around the early price action.
So in the first 30-minutes of trading the price was whipsawing up and down with what I’d characterize as just generally “choppy” price action. The system Alerts were indicating the levels where the price might break free from the chop and make a trend move.
That finally happened when the 10:00 “breaking economic news” hit the wire. In past months I’ve discussed how the 10:00 news can affect things and to summarize, it doesn’t have a big effect on system performance over a long period of time. So we don’t want to skip trading an Alert just because news is coming out.
The exception is the Fed Announcement so I thought I should mention that since we have one this coming Wednesday.
But back to the chart. The 10:00 news reaction created that long-range 1-minute price bar that actually triggered-in the second Long Alert at 10:01. The Entry was less than ideal because it triggered-in 5.25 points past the Alert Price. Typically a couple or a few ticks or even a couple or a few points is more common. But the price was able to hit Target 1 in the next 1-minute price bar and the Trailing Stop tightened. But in the next few minutes the price snapped-back violently and hit the trailed stop which you can see marked on the chart.
So basically what we saw was extremely hectic and choppy price action to start off the week and we see how a “news event” can create some havoc. Sure Target 1 got hit, but the fill was less than ideal and everything transpired so quickly that the system only had a chance to tighten the Trailing Stop once. The violent snap-back in price knocked-out the trade before the trend had a chance to develop.
As you know if you’ve been trading the system for a while, there are sessions where Target 1 gets hit and then the trade gets knocked-out by the tightened Trailing Stop, then the price ends up making a move in the direction of the Alert and goes on to hit Target 2. But mathematically that’s preferable to “not having the Trailing Stop” tighten. That’s because the price can reverse at any point in time and the basic concept of the system is to get the Stop to “around breakeven” as quickly as possible. That way we reduce risk and what happens after that is up to how the subsequent price action manifests.
So over a long series of alerts the systems “edge” comes from the fact that the Trailing Stop tightens when target 1 gets hit. Sometimes that thwarts an Alert that would have hit the second Target, but in the long run the system is designed to reduce risk. It’s “reacting” to the price action rather than trying to predict anything.
Which brings up something interesting. It’s been 2-years since we released the current version of the Alert Software. Over that period of time the Hit Rate on Target 1 has been right at 75% over a total of 832 filled Alerts. That’s pretty impressive and actually not surprising since we have the system “calibrated” to do exactly that. In other words the system is designed to calculate the optimal distance for the first target so it will get hit 70-75% of the time.
That’s where the “right around breakeven” comes in. If we can eliminate the risk on 75% of the trades, then over time the price action takes care of the rest. Once a trade hits Target 1 there’s no risk of a losing trade. (keep in mind we consider a couple/few points on either side of exact breakeven to be a breakeven trade since the system is shooting for big points).
Sometimes when the price action is choppy the result is that the tightened Trailing Stop gets hit then price goes on to make a directional move without us. But in the long-run that’s fine because the breakeven trades give the system its quantifiable edge.
May is Historically a Great Month for Trading Futures
May has traditionally been a great month for the Momentum System over the years “seasonally speaking”. I know I’ve said that about the last couple months too, but in past years Spring time has just typically been a good trading environment overall. June is relatively normal but then July and August tend to be really dull and things slow down a lot. The Dog Days of Summer see lower participation and volume and people go on vacation and a lot of sessions end up boring.
But this year I’m not sure what to expect. As I’ve been saying now for the last several months, the environment so far this year is anything but normal. Maybe this Summer we’ll see more normal market conditions instead of extremely boring sessions.Those of you that have been doing this for a long time know what I’m talking about. In August it’s not uncommon to see the market grind sideways in a tight range for hours. The 5-minute ranges can be like 3-4 points and a 10-point move seems enormous.
What’s funny about that is in the current market environment, 10-point moves in just a few minutes are the norm.
As we get into May 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, but usually gets updated with new material every couple / few days. It’s a good 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
April 2025 Commentary – Notes – Education – Examples
PowerEmini Day Trading Futures – Automated Alert Signals