One question that comes up frequently is how to interpret the “traction” display at the top of the software.
The Traction Indicator Scores the Effectiveness of Each Trade Alert
On the screenshot below I circled the Traction Indicator and once you understand what it’s showing, I think you’ll see why it’s an ideal way to “score” each Trade Alert.
Once a Trade Alert fills, the indicator immediately kicks-in and displays the max distance the price has moved away from the Alert Price in both directions. It updates at the close of each 1-minute price bar and is useful in several ways.
Here’s the simple explanation of how it works:
The Traction Indicator shows us how many points an Alert went against us and how many points the price moved in our favor – from the Alert price.
This shows us how much “heat” we took on any given alert and what the max point move in the direction of our trade was. It’s not only an ideal way of “scoring” each alert but is particularly useful in the case of “runners” that blast through both Targets and continue to run in the direction of the trade.
So in the example above, since this was a Short trade, when the Alert triggered-in, there was a 1.50 point move above the alert price, which was “against the direction we wanted”. That’s why it shows -1.50.
But the point and a half heat we took on this Alert was short-lived and minimal. The price subsequently moved as much as +33.00 points in our favor.
It’s displayed as a positive number because it’s measuring the progress of the open trade in the direction of the Alert. Since this was a short trade, any move higher than the Alert price shows in the negative side and the “traction” in the direction of the Alert shows positive.
You can see why this is so important in the screenshot below. We can see how the trade played out in the System Notes.
In my previous post I went into detail about the System Notes (read them from the bottom up) but the important thing to note is the distance to the 2 Targets.
You can see that within a couple minutes of the Alert triggering-in (Entry Confirmation) it hit Target 1 for +5.50 points and then went on to hit Target 2 for +18.25 points a little while later.
Notice the difference in the time stamps from when price hit T2 and the time I took this screenshot. You can see that in the very bottom right-hand corner of the Alert Software that shows the time of day.
I took the screenshot about an hour after the second Target got hit. And the Traction Indicator shows that the price had moved as much as 33.00 points in our favor away from the Alert Price.
Why this is important:
Say you were trading 3 Contracts with the goal of selling one at each of the 2 Targets and holding the third Contract as a “runner”. So in addition to locking in gains at each of the 2 Targets, there were a lot of potential extra points available.
This is where a little discretion comes in handy.
You could have managed the Runner Contract with the Trailing Stop or the Aggressive Protection Level (which is simply a tighter trailing stop). Or you could have chosen to use your own super-tight stop and captured a significant chunk of that 33.00 points of “traction”.
So I think you can understand why the Traction Indicator is so useful – especially in the case of Runners.
The Traction Indicator is useful for every Alert because it’s “scoring” the progress of each Alert in real-time. It’s simply showing the Max distance the price moved in our favor and against us. It’s extremely useful for monitoring how an open trade is progressing.
Some Alerts will show 0.00 negative Traction. This occurs when an Alert triggers-in and begins moving in the direction of the alert instantly and never looks back. In other words the price never moved “in the wrong direction” after an Alert filled. Over time you’ll see quite a few alerts that have enough “forward inertial” to continue moving in the direction of the trade from the moment it gets filled. That’s the kind of Momentum we like to see.
So the Traction Indicator is simple to understand and very useful for monitoring the progress of open trades in real-time.
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