The Power Emini Momentum Breakout System is designed to key off of the Dynamic Trigger Range. The Dynamic Trigger Range computes a high and low price level which auto adjust in response to market price movement. You will want to plot two horizontal lines on a 1-Minute chart at the high and low to maintain as VISUAL REFERENCE points for price action.
The Dynamic Trigger Range formula is designed to pinpoint with great precision the EXACT PRICE LEVEL where the next MAJOR PRICE BREAKOUT will occur from either Long or Short. Conversely you can think of INSIDE THE RANGE as a NO-TRADE ZONE. This helps you simplify your trading approach on being able to always know the breakout boundaries and the no trade zones.
The system is monitoring the shifting market boundaries for us. Everything in between the Dynamic Trigger Range can be considered Noise and does not quant out for low-risk / high probability trading based on this system. We sit on the sidelines when price is trapped in the range. When the buyers or the sellers can break us out of the range the market has room to run and usually attracts increased participation.
The Dynamic Trigger Range is designed to provide us with Trade Barriers.. i.e. a no trade zone. It’s when price can break out of the range that the buyers or sellers can run the ball across “Free and Clear” zones in the market.
The wider the range, typically the more congestion the system is trying to keep us out of. Many times we see our best momentum breakout impulse moves when the ranges start to get narrow, around 4 points or less.
The Dynamic Trigger Range will “shift” automatically throughout the day based on price movement and will widen out – or tighten up – depending on market conditions. We recommend you always keep a horizontal line at the range high and range low on your chart.
Price Can Trend When It Moves Into The Free and Clear
A basic concept of a trending market is that price needs to get Free and Clear of entanglements before it can really run. The Power E-Mini Momentum Breakout System is designed to spot these entanglements and incorporate them into the Dynamic Trigger Range. (Half the battle is knowing when to STAY OUT OF THE MARKET and NOT attempt to trade.
This forces you to only focus on the Stronger Impulse Moves that occur when price is able to free itself of restrictions. Sitting on the sidelines is an important part of the trading process.
The benefit of trading this system – is that anytime the market makes a significant move – in either direction – the system will catch it. Think of it as a “range breakout” system.
Keep in mind the follow-through on any range-break will vary depending on multiple factors. (see below)
The Momentum System Trade Playbook
Although there are probably a dozen different scenarios for how a Trade could play out after you take the entry, there are 4 main PLAYS that will occur with great frequency which we will review here.
The Momentum Breakout System is designed to detect Building Momentum at Strategic Breakout points that I have discovered occur during certain market conditions. When these breakouts occur the market is primed for a BIG MOVE out of a congestion zone, but everything depends on the LEVEL and strength of Momentum.
We will see 4 basic types of Momentum conditions in the market.
(1.) STRONG Momentum. (2.) Moderate Momentum. (3.) Weak Momentum. (4.) No Momentum.
STRONG MOMENTUM: When there is super strong momentum in the market we will see clean setups form and very quick fills at the 1 point Delta Target shortly after we take our entry. When the Momentum is Super High, trades tend to take off like a rocket and “Never Look Back” going on to hit 4+ point targets with speed and ease – like a runaway freight train smashing through any obstacle in its path.
Moderate Momentum: This level of momentum will get us to the 1-point Delta Target quickly but then somewhere along the way – after advancing toward our target – the momentum drops out of the market and we slide back to hit a Trailing Stop that the system has issued. The buyers or sellers who initiated the breakout might have simply run out of steam, or price might have gotten bogged down in a new congestion level that it is unable to work through. This trade profits on half from the 1 point delta target and then whatever the point gain is from the 2nd half of the position is stopped out at the trailing stop.
Weak Momentum: At this level the buyers or sellers who break us out have just enough strength to get us to our 1 point Delta Target but not enough energy to run us any further. Typically the price move will fizzle quickly and back slide to hit our Delta Stop 1 point back behind entry. This trade is still considered a WINNER as we planted a seed in the market with the opportunity of gain and even though there was no follow-through we did not suffer a loss for the exposure.
No Momentum: Just enough temporary momentum to trigger us into a trade, but afterwards there is absolutely no follow-through to even get a fill at a 1 point Delta Target. Either there is just no interest by the reinforcements after the buyers or sellers attempt the breakout or perhaps we get an abrupt change in the momentum against us sparked by a news event, etc. In either case this trade quickly runs against us to hit our full 2 point initial stop loss. (Needless to say… we don’t like this outcome)
The success of any day will depend on the level of momentum in the market during the period we are actively trading it. On a super high momentum day… we may be able to hit 4+ point targets 3-4 times without breaking a sweat. Other days when there is little or no momentum it may be impossible to get any traction on our entries and we may suffer successive stop-outs on our trades.
Understanding that the outcome of every trade depends entirely on the levels of Momentum (and that momentum can increase or decrease in the blink of an eye) will help you to become a better System Trader. Remember the job of the Momentum System is to alert us to the Breakout Areas based on a set of predefined criteria. That’s it. The follow-through and the success or failure of any given trade will be related to the strength of the Momentum after we take our entry. (…as well as the degree of price volatility currently in the market.) We are “playing the odds”. The Momentum System wins over the cumulative series of trades even though we may experience periods of low momentum conditions that make trading tough and frustrating. (like a disgruntled surfer waiting for some good waves to come in.)
Summary of the Momentum Breakout System