The Market Traction Meter is a dynamic gauge of the current level of the momentum in the market. The Market Traction Meter helps you see what the system sees.
There are 4 levels.
(1.) Light Momentum. This occurs when the market is in balance and neither the Buyers or Sellers are in control. At this level there is little conviction one way or the other and the market will be in an “aimless chop” mode. The system does NOT issue trade alerts during Light Momentum.
(2.) Medium Momentum. At this level we have a slight bias either to the long side or the short side and trade setups begin to form. The system may or may not issue trade alerts at this level.
(3.) Strong Momentum. At this level there is a trend in progress and its just a matter of time before the system alerts us to get us into the trend somewhere.
(4.) Super High Momentum occurs when we are in a Strong Accumulation up day or a Strong Distribution Down day on high volume.
Each level will have a different degree of follow-through on trade entries. Strong Momentum and Super High Momentum have the best follow-through and is where we commonly catch 4+ point runners with ease. Medium Momentum is the riskiest level to play as the traction can be “iffy” and the follow-through light. This is where we see the most short squeezes occur as well as false breakouts to the long side.
The tricky part is that many times the market will transition into Strong Momentum out of a Medium Momentum level after we get into a trade so it is not as easy as just waiting for readings of Strong Momentum. Everyday the market gives us a somewhat different environment to work in and has a different personality. Part of being a good trader is understanding this “bi-polar” nature in the market and not expecting the same trading results everyday. Some days the market is as smooth as butter and trading can be like shooting fish in a barrel. Other days the market seems to just be waiting to stab us in the back and taking entries is liking jumping into a mine field.