Our 4 Phase Plan To Get You Trading The Emini Futures Like A Pro – 100% Mechanical!
Welcome To Power Emini Futures Trading!
The Emini Futures markets provides the day trader with a fantastic highly leveraged trading vehicle that can lead to large profits even for small beginning account holders. However this built in leverage is a double-edged sword and many new futures traders can experience large draw-downs and take losses in their accounts when first starting out as they attempt to work through the learning curve in the beginning.
Here at Power Emini we have a great new ALGO called the Momentum System that is both easy to implement and can be followed safely and mechanically without incurring large upfront draw-downs. The Momentum System ALGO wins mechanically OVER THE SERIES and has a built in profit edge simply by following the system generated numbers and NOT attempting to second guess the entries.
The Momentum System works by attempting to gauge early on – shortly after market open – the general direction the market will take for the remainder of the session. The basic concept is to plant contracts in the market at key levels at the start of the session and let them run as long as possible to capture the larger moves the market makes. The Algo generates a Trade Price Barrier, i.e Trigger Price and 2 dynamic targets as well as an initial protective stop loss level that converts into a trailing stop as price moves in our favor.
The Power Emini Momentum System runs on the -M tabs in the Power Emini Desktop Alert Software and is available for the ES, NQ, YM and RTY Futures symbols. (Note the system works identical with the corresponding micro contracts, MES, MNQ, MYM, M2K).
Click the Settings Button and check the Momentum system checkbox for the instrument you want to follow and that tab will display in your Alert Software. The ES-M tab runs the Momentum Target System for trading the ES or MES (micro) as pictured in the screenshot below.
Hours of Operation:
The Momentum Target System becomes active shortly after normal market open (cash open) each day and runs up to the market close. You will typically see 1-2 Alerts per day, and the system will generate 2 Dynamic Price Targets per Alert.
No new Alerts will be generated in the last 1 1/2 hours of trading (after 2:30 Eastern time) however if an alert is in still progress the system will continue to run until the Trailing Stop is hit or the market closes (at 4:00 Eastern).
If an Alert is “triggered in” with an Entry Confirmation and then goes on to hit both Target 1 and Target 2, when the Trailing Stop gets hit the system will go offline for the remainder of the day. That session is considered a “big win” and there’s no reason to risk giving anything back.
Basic Overview Of The Momentum Target System
The Momentum Target System attempts to follow the primary intra-day market momentum and keys off the System Opening Range of the day as its balance point. The system will only issue long trade alerts ABOVE the High of the opening range and only issue Short trade alerts BELOW the opening range. (Note: The System Opening Range high and low will be displayed in the center section of the Alert Software on the ES-M tab as the Dynamic Trigger Range. (These Numbers Remain Fixed for the Momentum System for the remainder of the session.)
Basic Components Of The Momentum Target System
1.) Initial System Opening Range
As mentioned above, the Momentum Target System keys off of the System Opening Range as its main reference point for the session. We will always see strongly trending markets to the upside break out of this initial range and move higher and higher away from it. Vice-versa, we will always see strongly trending markets to the downside break down out of this initial range and move lower away from it. Dull trendless markets may cris-cross back and forth around this initial range to varying degrees.
2.) Trade Setup Alert
When price is trading outside the System Opening Range the system may issue a LONG – Trade Price Barrier Alert when ABOVE or SHORT – Trade Price Barrier Alert when BELOW. The Trade Price Barrier gives you a trigger line to work with in confirming your final entry. You will typically have 1 minute to confirm entries after a Trade Price Barrier Alert goes out. (Note: Just above the Alert in the desktop software you will see a time stamp for when the alert was received as well as a System Trade Entry Confirmation come through in the system notes section below).
3.) Initial Protective Stop
When an Alert is generated, once it is “filled” via the Entry Confirmation message, an Initial Protective Stop will be generated. This is a hard stop that you should place which protects against catastrophic loss should we see a runaway market against us. Note: The Initial System Stop can be 5-8 ES points under normal circumstances and larger still during super volatile market conditions. The purpose of the initial wide stop is to give the market enough wiggle-room to allow price to get off the runway and move in our favor without getting knocked out on normal price fluctuation. Although these initial momentum stops are much bigger than what we would use for scalping strategies, which utilize much tighter stops, they are not to be feared as the end results over time still statistically pan out in our favor. i.e. we will have much larger profitable moves in our favor over the series than full stops getting hit. The ES Momentum Systems employs a “fixed maximum stop” of 18.00 points.
4.) System Trailing Stop
When the market momentum heats up and price begins to trend in our favor the Initial Protective Stop will convert into a Trailing Stop and eventually begin to tighten the gap below your position. As the Momentum Target System is designed to keep you in the market for extended moves throughout the session, you will notice that the system trailing stop will give price wide wiggle room and may seem to move slow in comparison to current price movement. The Trailing stop is designed this way on purpose as our primary goal is to stay in and ride out the volatility.
(One of the worst feelings is to get knocked out of your position by a temporary price spike and then watch the market go onto make a huge move in your favor) In trending markets you will see the system trailing stop eventually pass your entry levels and move on to protect profits. As price continues to move in our favor and we get closer to the end of the session the trailing stop movement will accelerate and tighten to lock in and protect more gains.
5.) System Dynamic Price Targets
When a Trade Price Barrier alert is issued and an Entry confirmed, the system will compute 2 Dynamic Price Targets based off the current day’s early morning / pre-market range profile. Think of these targets as high probability price targets where you have the option to take all or a portion of your position off the table. You will find that over the series the statistics generally break down as follows [ T1 = 70-75% T2 = 35-40% ]. The system will send the 2 dynamic targets out through the system notes, and the most immediate price target will be displayed in the main body of the alert software. Note that the system will “trail the stop to virtual breakeven” once Target 1 gets hit. Target 2 is programmed to be a large distance from the Entry (based on current ranges and ATR’s).
6.) Aggressive Protection Level / Parabolic Stop Alerts
In addition to the normal Trailing Stop the system employs two additional types of stops. When Target 2 gets hit the system will issue the Aggressive Protection Level (stop) in the System Notes portion of the Alert Software. This is designed for traders trading multiple Contracts as a level where they can choose to take additional contracts off the table to protect gains. At certain times the system may generate an optional Parabolic Stop recommendation. This situation occurs when we see price momentum and trajectory accelerate very quickly to extremely Overbought/Oversold, i.e. unsustainable short term levels. A trader can use the parabolic stop on their entire position to squeeze out final profits after a good run or use it as a protection level on a portion of the trade holding the remainder with the normal trailing stop. Parabolic Stops only get issued when market momentum is extreme. (Note: The Aggressive Protection Level and Parabolic Stop levels are ONLY issued through the System Notes Section of the desktop alert software)
7.) Confirming Trade Entries
When the system issues a Trade Price Barrier alert this is NOT to be interpreted as the final entry signal. Instead this price level is a reference point which we will use to CONFIRM our entries. The Trade Price Barrier represents a “Line-in-the-sand” or “Price level to beat” before we pull the trigger. 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. Click Here for more detail on the Entry Confirmation strategy.
Winning Over The Series
Trading is a game of odds based on timing and tolerances and repetition. A crucial concept to keep in mind regardless of the exact approach you take in following the Momentum Breakout Target System is that the statistical edge is attained by taking many trades over time, i.e. we win over the series. All strategies and systems have some failure rate and seeing good results from futures trading can at times be slow and frustrating for days when we experience sluggish market conditions. What this means is that you must plan ahead to reserve judgement on your P&L until you have completed a decent number of days following the system, i.e. 10-20 market sessions. In order to manage this though and stay in the game you should start off with very small position sizes so you can push through the series regardless of any temporary upfront drawdowns which would otherwise cause you to halt your trading activity and abandon the system. If your initial position sizes are too big to start with, this is very likely to happen. As your trading performance and profit edge are achieved over a decent set of trades you can begin increasing your position sizes pyramiding to greater and greater size over time, thus increasing your profit potential. It is highly recommended that all new followers of the system spend at least one week trading on SIM mode to work through the basic mechanics and get a feel for follow-through before trading in a live account.
Our 4 Phase Plan To Get You Trading The Emini Futures Like A Pro – 100% Mechanical
If you can follow this four part plan with our Momentum Breakout Power Target System and stay disciplined you are on your way to success.
Phase 1 – Get Started And Trade On SIM for 1 Week
It is very important that you first spend your first week following the Momentum Breakout System on SIM MODE just to give yourself time to work through the basic mechanics and witness for yourself how the system performs over the series in different market conditions WITHOUT any emotional influences or attachment to live capital. This prevents the dumb-luck of potentially hitting a few draw-down days in bad market conditions right off the bat, losing money and deciding to quit BEFORE the system has a chance to recoup the losses and move on to profitability. The hallmark of any good system is that it will automatically self-correct over the series of trades, but one has to stick to the series for this to work. If you rush into things in a live account, incur upfront losses, get emotional and quit out of fear … you shoot yourself in the foot. Slow, steady and methodical is the better approach.
Phase 2 – Begin Trading LIVE with 2 Micro Contracts And Take Profits At Target 1 and Target 2
To keep things real basic and the initial risk low we recommend EVERYONE get started following the Momentum Breakout System with only 2 Micro contracts and take profits at Target 1 and Target 2 – using the main wide system Trailing Stop. Target #1 has roughly a 75% or greater chance of getting hit and Target 2 will get hit about half the time for a significant point gain. You will enter 2 micro contracts (MES, MNQ, MYM) at market after the official trade entry confirmation and then immediately place a sell limit order to exit 1 contract at T1 and a limit order to sell the other contract at T2. Place your initial protective stop loss at the system stop level and then just move your stop when the momentum system alerts you to do so. (Note: If you notice price getting super close to target 2 you have the option of discretionarily deciding to move your stop to Break-even or even Target 1 at that point). Follow this for 3-weeks and this will complete your first month.
Phase 3 – Graduate To 3 Micro Contracts and Still Scale Out Your Exits At T1 and T2.
At the start of your second month you can graduate to 3 Micro Contacts and follow the same exact approach except that you will now Sell 2 Contracts at Target 1 and Sell the remaining contract at Target 2 (or the trailing stop – whichever gets hit first. Target 1 gets hit roughly 75% of the time. Since the Trailing Stop will have you near “virtual breakeven” once Target 1 gets hit, this will typically ensure you come out of any trade that hits T1 with a profit.
Phase 4 – Scale-Up To 4 Micro Contracts – Scale Out Your Exits At T1 and T2 (same as above) but hold the final Contract for a “Runner”.
Once you’re ready to take the next step and unleash the full power of the Momentum System, you can scale-up to 4 Micro Contacts and follow the same exact approach except that you will now Sell 2 Contracts at Target 1 – Sell 1 Contract at Target 2 – and hold the 1 remaining Contract as the “Runner” and just manage it using the Trailing Stop. The advantage to this will become apparent on the occasional “long-range day” where the price hits both T1 and T2 and just keeps trending in the same direction for a massive move.
Since the trailing stop will be right around your Entry by the time T2 gets hit, there’s literally no risk of holding any additional contracts once you’ve locked in gains at T1 and T2. With the “runner” contract in place, you will typically see the price tag the trailing stop somewhere between T1 and T2 but on occasion – on certain occasional “long range days” in the market – the trailing stop will surpass T2 and then your runner can really score big points. This is going to be a function of the market itself, but we know that big market moves occur and this is the way you’ll capture a bigger point gain that you’ve probably ever imagined.
How To Pyramid Your Way To Even Greater Profits
If you follow our 2 month “Getting Started” plan following the Momentum Breakout System mechanically you should be well on your way to gradual consistent profits in the futures market. At this point you have the option of simply following the T1-T2 exit strategy and increasing your position sizes each month using a simple Contract Progression Strategy, i.e. 2, 4, 6, 8, 10 etc.
(Note: 10 micro contracts = 1 standard emini contract so when you reach 20 micro contracts you will want to graduate to the full sized contract as they offer a lower commission cost, so you would start back at the 2 contract level again and begin pyramiding the full sized contract from there.) Variation #2 on a similar theme involves pyramiding 1 new contract each month and scaling out over the 2 targets or being taken out at the trailing stop whichever comes first.
The important thing to remember is that BIG POINTS ARE SCORED WHEN PRICE HITS TARGET 2. And also on the occasional “RUNNER” contract – on certain days where the market makes a significant directional move. So you want to build up to the point where you are able to hold a “runner” contract that hits the occasional home-run. Long-range days are guaranteed to occur, it’s just a matter of realizing they don’t occur every session.
There are many possible variations on trade management using the Momentum Breakout System but the most important thing to keep in mind is to keep it simple and low risk at the beginning starting off with the smallest unit size (2 micro contracts) and only advance to build size based on performance over time.
Summary – How To Think About The System Alerts
The Momentum Target System is designed to get you into, and keep you in a directionally trending market throughout the day session. It is not a short term scalper system and does not attempt to call every twist and turn of the market. As a follower of the system you want to make the assumption each day that the market wants to trend either to the upside above it’s initial opening range or to the downside below this initial range and the system’s job is to alert us to the best levels to plant seeds in the market that can grow as the market momentum heats up and begins to trend. The system is not designed around individual trades, but instead gives us a “Playbook” or “Framework” to key our positions off of, i.e. the system issues key price level information which we use as reference points to trade around. The ultimate goal is to be plant positions in the market and take advantage of super strongly trending momentum, i.e. long range days, capturing large point gains. The Momentum Target System system works great over the series and is designed to be easy on your nerves when trading it with the MES Micro futures contract.
Focus On Each Day Type Instead Of Each Individual Trade
You will do better following the Momentum Target System if you get away from thinking about individual trades and focus instead on results from each of the day types the system operates in. We basically see 3 flavors of intra-day market sessions which have a direct correlation to the degree of point capture we will experience following the system.
The first is the super hot trending day where the market is under heavy accumulation or distribution and we see massive amounts directional price movement. These days are by their very nature conducive to large point gains.
The second type we will experience is the V-reversal day where the market first makes a strong move in one direction for a certain amount of time during the session then quickly changes direction to sling-shot back in the opposite direction. These days can blast off from the open and then return sharply back to the open where they either stop, or continue on crossing the opening price zone and making another large move on the other side of the open. Since the system trades Long above the opening zone and Short below the opening zone, the first example will give us only one good momentum run to work with in one direction and the second example will see two price impulse moves to work long/short.
The third session type is the super dull churn day with limited directional price movement typically unable to ever really break very far away from the opening price level. We often see price move back and forth across the opening price zone in cycles of varying magnitude never able to ignite into a full blown directional trend. These days can hook us into positions with limited follow-through and this is where we typically experience market reversals that run to hit our full initial stops. This day many times ends as a narrow-range Doji (Open = Close) bar with no considerable price advancement either way. Just confused price action and lack of commitment.
Think of the system as a filter that these different day types must PASS THROUGH each leading to different results.
(1.) Hot Trend Day $$$
(2.) V-Reversal Day $$
(3.) Trend Failure Day ?
The system if followed over the series of days will self-correct after periods of drawdown. The goal is to attempt to maintain a relative break-even status (over a 2-3 day average) until we hit pockets of market action where we Score Big and lock in gains.
Final Recommendations To Get Started
New traders following the Momentum Target System should start off with 2 micro contracts and gradually increase position size as performance warrants and experience is gained. This go-slow approach will keep you in the game and allow you to work through the series which allows the statistical system edge to unfold. Following this “Pull-yourself-up-by-your-own-bootstraps” approach will help you avoid large upfront drawdowns as you push through the series and you can methodically pyramid your way to bigger and bigger position sizes and greater and greater point captures over time. Eventually when you reach the 20 micro contract size you will want to graduate to 2 contracts of the regular ES contract to take advantage of more efficient commission rates offered by the larger contract.