Let me show you why Trailing Stops provide a distinct advantage trading a volatile session.
Friday August 18th, 2023 is a fascinating example of what makes the Momentum System so extraordinary.
A lot of the concepts I described in the “in-depth overview video” came into play in the example below. You might say there’s more than meets the eye in the way everything transpired, so I wanted to do a little review and provide some insight.
The first thing to notice on the chart below is that the opening “Trigger Range” was much wider than what we’ve been experiencing in the recent market environment (16.00 ES points from top to bottom).
When the price began escaping the top of that range, the Alert software fired off an Alert to go Long at 4368.00, which triggered-in 6-minutes later. You can see the Entry marked on the chart as well as the time stamps in the Alert Software (below on this page). The Entry Confirmation – order filled – at 4369.50.
Due to the unusually wide range, the initial stop started off inside the range, with the “fixed max stop” of 18 points in play, which is quite rare. We haven’t seen that in a very long time. (it was opex day which contributed to the volatility).
So as you see, once the trade triggered-in there was quite a bit of initial volatility and a pullback into the range. The system adjusted to the wide ATR’s to prevent the trade from getting knocked-out due to normal price fluctuation and volatility.
The first 45-minutes of trading looks like an attempt to knock out both shorts and longs before the primary trend of the session developed. Those were some pretty large price swings.
A little over an hour into the session we started getting some decent traction in the direction of the Long trade and the Stop ratcheted up. (Trailing Stop move 1). Typically the Trailing Stop will move prior to Target 1 getting hit but not always. At this point the max stop was no longer a risk.
Once Target 1 got hit at 11:11 the trade was in the clear. The Trailing Stop immediately ratcheted-up again at that point and the trade was at “Virtual Breakeven”. That’s one of our primary goals – to get our stop moved to breakeven as quickly as possible.
When Target 1 gets hit, the system Trailing Stop instantly moves to put the trade at Breakeven.
(We have a lot more information on the Breakeven Stop move here)
Shortly after Target 1 got hit, notice the “counter-trend” move that most likely knocked a lot of longs out at that point. At about 11:45 the price spiked down almost to the top of the Range and poked at our Entry. Fortunately the Trailing Stop at the time was a safe distance away – and already had us at breakeven. (actually had that breakeven stop been hit, we’d still have closed out with a +1.75 point gain).
One of our primary goals – to get our stop moved to breakeven as quickly as possible.
So it’s right about Noon (EST) and the trade continues to move in our favor, pushing past Target 1 again. Notice how the 3rd Trailing Stop move was strategically placed right under that earlier “spike-down” pivot low. The software calculates all this automatically, using the current price action, ATR’s and volatility.
As price pushed about mid-way between Target 1 and Target 2, the trailing stop ratcheted yet again a 4th time and that’s where you see it finally got tagged – at the Trailing Stop exit. You can see how that level was basically “protecting gains”.
The Alert Screenshot below was taken before the final 4th Trailing Stop move, but the final exit occurred at 4374.00 on the 2nd contract.
It’s interesting to note that the Target 1 gain was +7.25 points, but the final Trailing stop exit resulted in a gain of just +4.5 points on the second contract. If you add those together, it amounted to a respectable +11.75 ES point gain and the system was basically “done for the day”.
Time to go to lunch and do other stuff.
That counter-trend move / spike-down after the trade was closed retested the low where the 3rd trailing stop had been. For all we knew at the time, the high of the day could have easily been in and the market was starting to roll over. In hindsight it was just another attempt to knock-out the longs because it rallied into the end of the session. (and price actually made it to the T2 level in the last half-hour). Opex days are weird like that – you never know what might happen near the end of the session.
Keep in mind everything transpires automatically in the software
That’s the beauty of trading an automated system.
Imagine trying to navigate these volatile moves making snap decisions, flying by the seat of your pants.
The goal of the Trailing Stop is to hang back just out of harm’s way – to help keep us in a trend move without getting knocked-out by normal volatility and price fluctuation.
But guess what? It’s ok to use a bit of discretion when trading the Momentum System. I’m actually confident you can improve your results and probably find that using the system as a “tool” at times could actually be a huge benefit to your trading.
For instance, what if you chose to “go ahead and take the profits” when price was mid-way to Target 2? Perhaps you were trading 3 contracts and you were up 10 points on the 2 contracts you held past T1 and peeled another one off there? Maybe you were hungry and decided just to close out at Noon with a pretty nice win and just be done for the day (it was a Friday after all). Maybe you didn’t want to stick around and see whether it would make it to T2 or hit that 4th Trailing Stop.
There are plenty of ways to improve on the raw results without deviating too far from the basic structure of the system. The point here is that the Momentum System is going to work with the price action the market is serving up – each and every session. It doesn’t attempt to predict anything – it reacts to what’s unfolding in the market in real-time each day.
And it doesn’t have the type of emotions we do. I know personally if I were trying to trade those ups and downs and all that volatility you see on that chart, it would be nerve-wracking and I’d be second-guessing myself all along the way. Having some “structure” to your trading is key – and that’s what the Momentum System provides.
Imagine going into each cash session knowing you have a “system” in place, that’s going to read the price action and tell you exactly when you have a high-probability set-up, where to set your stops and trail them, and where are the pertinent levels are.
I know for a fact there’s no “Holy Grail” out there and there’s a lot more to trading than just finding good “set-ups”. We have a great article on that here.
If you haven’t seen our “comprehensive training video” yet, it’s the best presentation we’ve ever done about how the system works – and what makes it tick.
Imagine scoring more points in just 1 morning trade, than you would spending all day grinding it out trying to scalp for peanuts.
The Power Emini Momentum System “algorithm” is unlike anything you’ve seen before. It reacts to the specific real-time price movement each market session. The software displays an Entry, Stop, Trailing Stops and Targets.
Once Target 1 gets hit, a trade is at essentially at “Breakeven”. The example above provides a good demonstration of how that works, and I think you already understand why “getting to breakeven quickly” is one of the best strategies you can use to reduce risk.
Market conditions have turned very favorable for the Power Emini ES Momentum System recently.
Take the Momentum System for a test-drive and see for yourself how systematic trading is the way to go. As the volatility increases and the “market action” really heats up this Fall, you’ll find trading a system like this is so much easier on the nerves – less stressful – and less work than trying to make sense out of every wiggle on the chart.
Get started right now by clicking below and see for yourself how this system can help improve your results:
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