Gauging The Strength Of The Market
The Power E-Mini Desktop Alert Software provides you with 2 ways to visualize Market Strength at a Glance. The Momentum Meter is a sophisticated proprietary formula that measures market strength and price velocity in 3 different ways. While price can move a profitable distance even in a slow-cold market, savvy traders tend to focus on more aggressive trading during ACTIVE-HOT markets when price makes quicker moves with greater liquidity. These indicators are particularly useful when trading the Scalper as they help us determine when market conditions are ideal for a continuation move when the price breaks out of the Dynamic Trigger Range.
A Reading under 50 on the Momentum meter signifies low-participation, dullish conditions which may affect trade follow-through OR a Reading greater than 50 which signifies Increased, Higher Volume participation, higher volatility and potentially faster/greater price follow-through. The 2nd tool is the Average Volume Reading. This is a special proprietary formula that gives us a running average of overall Volume Flow in the emini. A consistent reading of 2000 is the minimum we want to see to expect follow-through on a breakout..
If the volume drops below the 2000 contract level (as averaged out over a 3 minute period) – the market is likely to be DULL and follow-through lighter. A consistent reading AT OR ABOVE 2000 is a market that has better participation and potentially greater follow-through. You will see extremes in both directions with some overnight readings as low as 10 and readings of 25,000+ contracts/per minute during an active day session when there is a large scale news catalyst driving the market. Keep in mind that volume flow is very dynamic and can increase and decrease in waves or cycles throughout the day.
When the Momentum Meter is in the Blue (Cold) Section and the Average Volume is less than 2,000 Contracts Per Minute – You typically want to AVOID Taking the Entry on a Range Breakout
Keep in mind that the Alert Software is going to fire off an Alert every time the price crosses one of the Trade Barriers – but that does not mean you want to trade every alert. We will be introducing an On / Off Switch in the Alert software soon that suppresses Alerts when the Momentum Meter is in the Blue and the Average Volume is less than 2k.
Keep in mind that these two indicators are meant to show the current “participation” in the market and can change quickly. So right at the point where ES is about to cross a barrier – the volume and momentum can pick up all of a sudden – and price blasts through the Barrier. But many times – especially on dull market days – or during the “lunch time lull” the price will drift towards one of the barriers and perhaps poke at it, but the “participation” is very low – as you can gauge by these indicators – so you generally want to avoid taking the trade in “cold” conditions.
Many times, entire trading sessions (days) are primarily dull. You want to get in the habit of avoiding trading during dull periods in the market, whether that’s part of any given day – or the entire day. The Momentum System is designed to catch large-scale breakout moves that happen in the market with regular frequency, but you have to be aware that these moves may not occur every single day. The Momentum Meter and Average Volume Indicators let us know when the conditions are conducive to a significant move in the market – and when conditions are dull and a breakout is not likely to follow-through.
See this page for more on Market Session Day Types.
Market Trend Direction Indicator
At any given time the market has a statistically quantifiable BIAS in the DIRECTION it is likely to move next. This is based on many internal technical factors. The Power E-Mini Desktop Software has a Trend Direction Meter with 3 possible readings. Green UP Arrow, Red DOWN Arrow, and Grey SIDE Arrow.
If we see a Green UP Arrow this tells us that there are currently conditions that favor the market to BEGIN MOVING and FOLLOW-THROUGH to the Upside. We use this information in conjunction with the Dynamic Trigger Range High to determine a potential entry point in order to exploit pending price movement.
A Red DOWN Arrow tells us to watch and potential trade to the DOWNSIDE. A Grey SIDE Arrow means either that the market has no exploitable Direction Bias OR is currently in a state of Transition.
A Green UP Arrow or Red DOWN Arrow will represent a market that is CURRENTLY TRENDING or SETTING UP TO BEGIN TO TREND in that direction making it confirmatory as well as anticipatory in nature.