How to Take the Entry on Momentum System Alerts
When the Alert Software issues a trade alert, there’s one final step before you actually pull the trigger and enter a trade.
This is called the Entry Confirmation or Entry Trigger.
The Trade Price Barrier / Alert Price represents a “Line-in-the-sand” or “Price level to beat” before we pull the trigger on a trade. The basic system trade entry confirmation is to wait for a 1-minute bar close PAST the Trade Price Barrier AFTER the alert is received. If you wish to follow the system mechanically you must wait for a 1 minute closing bar AFTER you receive the alert price level.
Entry Confirmation Notification
After a Trade Alert is issued you will want to monitor the price action on a 1-minute chart and wait for the very first 1-minute price bar to close – at least 1-tick past the Trade Price Barrier – and then you click to “Enter at Market” long or short. As soon as the Alert Software detects there has been a 1-minute price bar close past the alert price – it will automatically print the “Entry Confirmation” line in the System Notes of the software.
Notice the time stamps on the Alert and the Entry Confirmation in the screenshot above. After the Alert was issued at 9:36 it took 25 minutes for the price to close over the alert price. You can also see that the actual fill was 2 points over the alert price.
Generally speaking, when the software issues an Alert it gets filled relatively quickly. Sometimes it will trigger-in on the very next 1-minute price bar. Sometimes it will take 5-10-15 minutes before we see the 1-minute close past the Alert price. And sometimes the Alert never triggers-in and price moves in the opposite direction. In that case once price gets to about the mid-point of the Range, the Alert will disappear from the top section of the software because it was a “no fill”.
It’s possible to see a series of Alerts that never trigger-in because of our Entry Rule. If there’s no 1-minute close at least a tick past the Alert price / Trade Price Barrier then that Alert doesn’t “confirm” an Entry.
Understanding the Dynamics of the Entry Trigger
There are a couple important reasons why the Entry Trigger is designed this way – rather than just entering a trade as soon as the price moves above or below the Alert Price.
First, it gives you at least 1-minute to react. You might be on the phone, looking at the TV or reading an email when the software gives a Trade Alert. The audio alert gives you a heads-up that a potential trade is about to happen. So you have at least 1-minute to focus your attention on your trading platform and get your hand on the mouse – ready to pull the trigger and enter a trade.
In a fast market if we didn’t confirm the entry this way, the price may have already made a huge move and you missed it because there was no time to react.
Second, we want to confirm the momentum in the market – in the direction of the alert. Many times the price will spike up for a split-second and then go right back down. Sometimes this happens repeatedly before the price is actually able to CLOSE over the Trade Price Barrier. By waiting for a close past the barrier we are letting the price prove that it has at least enough energy to close past the barrier on a 1-minute chart.
Many times we will see a bunch of 1-minute price bars poke through the Trade Price Barrier but none are able to close past it – then the price reverses. This “entry confirmation” strategy helps prevent us from getting sucked into a false move.
Other times the market is making a strong move and the very first 1-minute bar after the Alert is issued closes past the Trade Barrier.
The time between the alert and the Entry Confirmation is a function of the price action.
That brings us to another important consideration – the actual fill on the order.
The Entry Confirmation (fill) may be a couple ticks or a couple points past the Trade Barrier
Depending on the price action of the market, the actual fill may be a tick or two past the trade Barrier / Alert Price or it may be several points past it. Don’t worry about this because it’s built into our strategy and over a long series of trades it won’t matter.
The distance to the first Target is calculated based on the Entry Confirmation price. However fills that occur significantly past the Alert price typically have more risk and a higher chance of hitting the stop. It’s just something to recognize. Also keep in mind that the Targets and Stops are relative to the ATR’s and volatility in the market at the time, and also relative to the size of the Trigger Range.
Remember, everything about the system is “dynamic” so market conditions will determine how everything plays out.
In some market environments the Trigger Range might only be a few points and in others it could be as large as 30 (ES) points and everything in between. The Alert Software uses the ATR’s and ranges in the market at the time to determine all the levels, which vary from day to day and self-adjusts for any type of market conditions.