Develop Your Investing Plan: 8 of 8 | Cameron May | 9-9-19 | Getting Started with Technical Analysis
Good. Morning. And welcome everyone my name is Cameron May it's 11 o'clock Eastern, Standard Time on a Monday, morning that. Means it's time to get back into our ongoing series. Of discussions, eight lessons called. Getting started with technical, analysis and today is lesson, or episode 8 where we're going to be discussing. Developing. Your investing. Plans so we're looking, back over the last seven weeks trying to pull it all together and put in and put some structure to it so I'm looking forward to this discussion, we have up to 30 minutes to spend together today I think we're in a good at gonna get it going to get it accomplished, a little bit less than that but as, we dive in let, me say, hello to all you returning thanks, for being here again dharia IO, de la Donny. Dave, Tom. Great, to have everybody on board, some. Quick reminders, of important information that we need to bear in mind first, and then we'll set an agenda. But. Any. Investment, decision you make in your self-directed account, is solely your responsibility, paper. Money success is not a guarantee that you're gonna have success with your real funds all investing, involves risks including risks of loss while, this webcast discusses, technical analysis other approaches, including. Fundamental, analysis, may, have certain very different, views for those of you who use technical, analysis for your options trading there's an overview but here's. Where we've been and what we're going to do today we, have eight. Lessons if you'd like to revisit those if you're watching on the YouTube archive, you can pause and read through these lessons, but today, is lesson. Eight developing, your investing, plan if you missed one of the earlier sessions that's okay they've all been archived, you can find those on our youtube channels or you can go to the education. Tab. On the, website and you, can find these archives, there. But. Today we're just talking about adding a framework adding, some structure, to trading. Now that we understand, all maybe the individual. Elements of using charts how, do we bring it all together all, right so here's our specific, agenda for today today. You'll learn, potential. Processes, and considerations, when compiling technical, tools and techniques into a standardized, investing, plan and we're. Going to apply these principles, and techniques by, building, a sample investing, plan so they threw the accomplishment, of those two agenda items I just want you to walk away with an understanding how you might build your own investing, plan pretty simple all right hello there Tom looks like we have a few others chiman Remy Diane, Thomas. Bruce lender. Could morning to all of you. Alright. But what what is an investing, plan well this is an investor's. Own personal. Set of trading rules or guidelines and. Generally. Speaking there's, a there's, a common, structure to those now obviously, from. One trader to the next from one investor to the next there may be a slightly different structure, but, when you're building your own investing, plan, here are some common potential, components, for that plan first of all there's, an objective or a purpose for the plan what are we trying to accomplish, secondly. How, we're going, to do that what, sorts, of things are we going to invest in those are what we call our watchlist, criteria, what kinds of stocks might they be for an example then. When, would we buy how. Much might, we buy when. Would we sell and how, might we revisit. This plan, over time and make refinements, and changes, those are our routines. So. That's the the, potential. Structure, let's. Go see an example. Of this now if you, need an example to follow along with you, can go to the TD Ameritrade dot-com, web site go to the education. Tab and go, to stocks so let's go there I'm. Going to bring up the TD Ameritrade site this is the home page once we've logged into an account will, pop up here to education, and as. We hover over that it's really only a couple of clicks we go over, to stocks. That's. Our first click, second. Click is to. Go to the. Stocks technical. Analysis, course this is a technical, analysis, discussion so. The sample plan that goes along with this discussion is found in that course so if we click continue. That'll. Take us right to where I want to. Show you right. Up here under resources. In that, course is a, sample, investing, plan. All. Right so, that plan is found right here and, if we look at that. Now. This one is specifically, for a price pattern, that's called a bull flag now John McNichol filled in for me last, time wasn't last week last week was a holiday so if we roll the clock back to like the 26th. Of August. John, Nichols filling in for me while I was out of the office and he talked about price, patterns, and this is a sample, investing, plan for. A trader who's using, price patterns, in their, in.
Their Trading okay. So. Notice here, are those elements, objective. Watchlist. Criteria, when, to buy how, much to buy as I, scroll down a little bit further. We'll. See when to sell and. Routines. So. Starting right at the top. What's. The purpose of this plan well this plan for, this example the, plan is to learn how to trade short-term rallies in an intermediate term. Uptrend using, both flag patterns that's it all. Right so. Let's, look at a stock that has an intermediate uptrend, and see if we can find some short-term, rallies. So. I'm gonna switch over to our thinkorswim platform and, here's Walmart, now. As you look at this do, you think oh. Just. Bump the button I didn't intend to but. Do you think a trader might be able to make. An. Argument that this stock. Is in an intermediate uptrend. It. Appears to be what we're looking at here is a nine-month, chart and. Walmart. Over the last nine months is making generally speaking higher highs and higher lows well. A trader, of bull. Flags might, be looking for something like. And. Let me. Erase. This line there, we go they. Might be looking for something like one of these sorts of pull backs or a pullback like this, or, very. Recently, we're, seeing a pullback if you're not familiar with a bull flag let. Me just illustrate that, I'm gonna zoom in here. Bear. With me my drawing tool is having a little bit of an issue that's. Okay there we go. But. Let me zoom in on. Just these last few. Last. Few weeks of activity, what are we looking at here maybe the last month and a half but. We know that the stock, trend has been going up. And. A trader might be looking for opportunities. To, buy within that trend, okay. So let's go back to our plan. And. See. If this stock meets our criteria for. Investment. Before we even look for an entry, so. The plan says one way to identify stocks, with potential bull flag patterns is to use charts and a scanner to find stocks exhibiting, upward momentum got, that and liquidity. But. Basically, we're. Looking for stocks that have a minimum average daily volume of 250 thousand shares per day now that we're talking about Walmart is it gonna have at least 250,000. Shares per day yes, and trade, it less milk no less than $10 per share for this example now. That may. These kinds of stocks tend. To have enough liquidity to, reduce the risk of what we call slippage. All. Right so. There's. Walmart have 250,000. Shares trading. On an average daily basis yes, is it trading, at at least $10 let's go have a peek at that chart again and as, we go there actually will, just bear that $10. Threshold. In mind but, let's talk about sample, entry, rules. When. Considering a position on a security, using a bull flag pattern, support. Bounces, and resistance. Breaks, our common, entry signals so remember. That and I'll explain bounces. And breakouts, we've covered those in an early too early or discussion so I'm not going to go into too great of detail. But. As we look at at.
Walmart. Let's. See what it's been doing most, recently, for those of you are not terribly familiar with. A bull flag pattern, it starts, with what we call the flagpole, that's, where we have an upward training, stock making, higher highs and higher lows and then, there's an acceleration of that upward trend and traders, or technicians, will refer to that sometimes, as a flagpole. And, then. We get the flag portion, of this, pattern where the stock pulls back down. For. A period of time against, that, accelerated. Upward movement, so. If, you haven't seen a bull flag before maybe this can help, you understand why this is called a flag why not let's throw on a few stripes here I, should. Probably should have drawn the stripes the other direction. Make. It more relatable but, there's our flag. Alright, so. When. Do we buy in this sort of a pattern theoretically. What we're seeing here is an acceleration, of an upward trend and that. May. Get some traders excited. If. They can find a new opportunity what. They're hoping for here is a repeat. Of that acceleration, because. If it's happened once like, it happened here maybe, it can happen again. Right. All. Right so. What's. The precise signal, that, might tell us in. A bull flag pattern, to get in well one. According. To our plan is to look for a bounce and as we've discussed a bounce. Is when we have a stock pulling, back. And. I'm, gonna use a historical, example here on Walmart you can see here's, Walmart pulling back after. An, acceleration. Of an upward move so I think you might be able to call this. Another. Example of a bull flag. We. Hit a low day that's, we're seeing right here and, then. We look for a close above. The high of that low day which is what we had the very next day, following. That that. Red candle, at the bottom of that flag pattern, so. That's what we might call it bounce entry, now. We're not seeing a bounce entry more recently, because. Today, is the low, day now, does that mean we can't use this as as, a, flag, entry. Not necessarily, because there are two potential, entry signals there's, the bounce and as we mentioned a breakout, a breakout. Is when, we have and let me just erase this, and, we'll start fresh with. This flagpole again, so here's our flagpole. We. Have the stock that has pulled down right. Through here. And. A. Breakout is when we break through that descending. Area, of resistance, that's this, line, again let me make it a little bit thicker I'm doubled, I'm drawing over that line again there's, our potential, resistance area and with, today's activity. With Walmart up 1.3, percent does, it look like we've broken out of that yes. That. Looks like we do have that break out so. We have some examples of both, types, of. Angell entries on a bull flag. So. Let's. Go back to that plan and somebody says where, can i jose said where can i get that PDF so. Jose when you're and I, don't mind revisiting, this, when. You're on the education. Tab go, to stocks. Click. On the stocks, technical. Analysis course and then. The plan is found right here under the resources, area sample, investing plan you can just go back and check out the archive if you didn't follow that but. Here's our sample. Investing, plan we've just looked at our sample entry, rules we have bounces, and breakouts. Alright, so if, we have an entry and it appears we do on Walmart, for our example today how. Many, shares might we buy. Now. This is going to vary from one investor to the next but according to our to this sample investing, plan. We. May. Choose to, risk. No. More than one half to one percent of the, total portfolio, value on a trade, so. From. One investor to the next their capacity, for risk is going to change but. Correctly. Position, sizing defining. That risk, or. At least defining, your potential losses can help manage the risk according.
To You and, I like how that's stated right here on the. Investing, plan. Now. 1/2 to 1% that that doesn't sound like a lot right let's say you have a hundred thousand dollar account that might imply only five hundred to a thousand, dollars are, we talking about that's. The most we can invest not. Necessarily, because, investment, and risk are not always. Exactly. The same terms they're not synonymous. If. I let's let's say that I spend ten thousand dollars on a stock but. I put in a stop that limits. Well, at least theoretically. Let's. Say I put in a stop so. That if the value, of my investment. Falls by. $1,000, I'm, out of that trade how, much am I actually risking, there well. Conceptually, I've, reduced the risk from. $10,000, to $1,000. Even though I've invested, ten thousand if my plan is to exit, after, a $1,000 loss I'm at least making an effort to manage that risk and. That's. The concept, here so. I'm. Actually gonna move down in our investing, plan and talk. About the sample exit, rules for just a moment when, might. A trader exit, on a bull flag entry, while. Planning potential, exits before actually, entering a trade can. Help mitigate emotions. Like fear and greed and it can help us define the, risk of the trade. Now. The. Investing. Plan here, proposes. Maybe setting, an initial, stop border at 1% as an example now, that's below the lowest day, in the pattern what. Does that mean. Let's. Come back to our chart. And. If, we have an entry. It. Says to look for the lowest day in the flag pattern, it's not talking about this day down here where the flag started, where. The flagpole started but, actually most, recently, this. Low, okay. So, if we're looking at this. There's. The low of this. Flag pattern, and maybe, going 1% below that that low looks like it's around 1 14 40. So. 1 put 1% below that's going to be about a dollar and 10 cents below that that, went out with surround around, 1:13, 30, something, like that. So. A trader, might have a sell order down there in, case this trade starts to break down now, what if the trade goes well. Those. Those, of you who are technically. Oriented traders. Or maybe who are just familiar with flag patterns, how. Does a trader plan, for. A flag, that that. Does, well well. They, may use the height. Of the. Flagpole. So. In this case we went from about a hundred and ten dollars up, to about a hundred and eighteen, dollars on this move. So. If we're looking at a. Potential. Target we, might look at the breakout, level, which appears, to be maybe about one fifteen and a half and. Tack. On eight, dollars, to that that, might give us 123. 123. And a half as a target, now that's going to be up off the top of our chart somewhere but. That's how. That's. How a trader might make a plan to. Try. To manage losses, if the stock is going down even though the usage, of a stop order is not.
A Guarantee, that will sell, it exactly that price it, just becomes a market order a. Trader. Might may still do that placing. A stop down here around 113, in our example, and maybe, a target up there around 120, three and a half, so. If we go back to our investing, plan. All. Right here. No that's not what I wanted there we are. Setting. An initial stop board or 1% below the lowest the, low of the lowest a might. Be a common flag exit. And technicians. Also. Frequently use the flagpole to create targets, it's. Used by measuring, the flagpole, and adding it to a breakout point to create a potential. Price target so, how, might that look, in. An. Actual order. Let's. Go place a trade. I'm. Going to pop up here to the trade tab now. That we have a plan for Walmart, I'm, just gonna type in WMT, stocks. Trading around 116. Where, was our our stop was around 113, 30 as I recall and our. Target around 120, 350. So. How do we put in an order to, buy the stock place. A stop order below, our entry and place, a target order above our entry here's how that's one, of the ways it can be done they're actually a number of ways that this might be done I'm. Gonna come over here to our ask price and right click on that and I'm. Going to enter a custom, buyer, and. We're gonna use an order type called an with, Osio bracket, the Osio means one cancels. Other in other words we're gonna put in two sellers, one. To try to manage the loss. Potential, on trade the, other one to try to capture the gains. But. We only want one of those ultimately, to be filled. Or executed, right if the stop border is triggered great, get, us out of the other order cancel, that if the if the, target. Order is triggered. Or filled cancel. The stop so, that's what the Osio, bracket, means. So. Here we are I am you'll. Notice I've. Set, my. I've. Set my font size to pretty large so that you can see more, easily as you're watching there, but. That can sometimes cause things, to get a little bit crowded so I'm gonna hide this left column here as. I do that just remember, if you if you're not following me yet on Twitter you definitely, have my invitation, if you want to jot that down at, CMA. Underscore. TDA. I'd. Love to have you there I really like that interaction, that we can have on a little bit more personal, level on the Twitter platform but. Let me just hide that left column now, you can see that order that we've created, buying. In this case would be a hundred shares of Walmart that would be about an eleven thousand dollar investment we, can change those. Share. Quantities, to whatever we like but.
I'm Just gonna leave that as a as. A hundred, shares. Price. On, the, buy order well we can put, in a limit order or a market order how about for today I'm, just gonna use a plain old market, order that means we're just gonna buy the shares, at the current market price, obviously. When you submit a market order we. Are taking the risk that that at. The moment our order is filled we may not be perfectly, happy might. Not be exactly the price that we're planning on. But. Let's, put in the stop and, the. Limit order or, the target, order on, our. Osio bracket, the limit, order is that target, and our target here was 120, 350. So. We'll just type that in as. Our. Limit when we put in a sell limit order we're saying I want to sell at this price or better and what's, better than selling at 21, 23 and a half selling. At a higher price and, I'm, gonna make that sell order a good tilt cancel that makes it effective for, the next six, months. Walmart. It very likely it's not guaranteed very, likely to at least get up to our target or maybe fall down to our stop within that six month timeframe, and. Now. That stop and I believe again that was one. 1331. Percent below the lowest point in that. Bull flag pattern. We'll. Leave that as a stop order place, that is good till cancels so what this does is if, the price happens to fall down to or below, 113 30 it fires off a market, order to sell our. Shares of. Walmart. And at the same time it would cancel as soon as that order is filled cancel. The the, target order. That's. It. So. Hey Edward no a welcome aboard Edward says he's late you're not late that's great thanks. For being here you can always catch up on the archive after, the fact but. That's how an. Investing, plan might, be filled, and how it might actually be even, implemented. Now. Once. A plan is written is it, written in stone, and. Obviously as I've been going, through this sample plan you've probably been thinking to yourself Cameron there are some elements here that I would add if I were constructing my own plan that, you didn't cover that's great there's. Flexibility, within this and of course I would suggest that you customize to. Suit your, own. Portfolio. Realities. And your own tolerances, for risk in your own. Allocation. Models, all of that. Alright. I'm not gonna actually send this order off but this is how it might be constructed, but let's go back to that plan for one last look and. Rob. Says will this be available for watching later yes this one is scheduled for archive now every once in a while Rob we might hit some technical glitch that might prevent a session from being archived, I don't. Anticipate that happening in this case just. Be aware but. The vast majority of our sessions are archived, so you can watch those on our YouTube channel or you can watch them through the education, tab, just go to webcasts, and go to our archived webcasts. All. Right but right down here at the bottom, in. A sample investing, plan you'll, see routines, and then, trader and an investor, might have daily, weekly, quarterly, routine and routines may be monthly, routines, conceptually. Annual, returns, these are just examples. But. For example on a daily, basis, an investor. Might be keeping an eye on their open positions, and see if they're any any, sell signals, are. Popping. Up they, may be looking for new trades, on a daily basis, and they, might be updating, what they call what we what we call a trading, journal, if you like to keep track, using, an Excel spreadsheet of you. Know when you bought when you sold. The. Reasons why you, can create your own at home, keep. Track of those sorts of things on a. Weekly. Basis, an investor. Might be out there conducting. Screens, or searches, to find new candidates, for, this plan it. Might not even be necessary to create, a screen because. The. The, characteristics. Of a, stock the watchlist characteristics.
For This, plan are really pretty basic at. Least ten dollars per share two, hundred fifty thousand shares trading on a daily basis. How. Might you find stocks, like that, well. Let me show you something, if you, go to thinkorswim. One. Quick, way that that might be done is, to just look at thinkorswim, public. Watch lists. You'll. Notice I'm using Walmart, Walmart is actually a component. Company, of the Dow Jones Industrial. Average and thinkorswim. Publishes. A watch list, actually. Let me backpedal, for just a moment here if you want to find thinkorswim public, watch lists you just, open. Up watch, lists as one of your gadgets you, can just switch your gadget, make sure that you've chosen watchlist, and. Then. Click on the watchlist heading, go. To public, and you, can find the, Dow Jones Industrial. Average that'll bring up those thirty stocks or you, can go for example to like the S&P 500, that, will bring up the 500, companies that make up the, S&P 500. Now. Of those companies do you think the majority of those are gonna be trading at least $10 per share yep do you think the majority of those are gonna be trading at least 250,000. Shares on an average daily basis, yep. Okay. So number. Of different ways that we might find candidates, that's. A couple of different ways. But. Going back to our plan. What. About what. Do we do on a quarterly, basis, well this is an opportunity to look back at your investing, look back at your trading plans, and see. If they require, refinement. So. On a quarterly basis, we might look at our trading and. Let's say that we that we notice, boy. This quarter I was in and out of and, just for example 50, positions. Let's. Say got. Out of 50 trades and in. Hindsight, I noticed boy I should have hung on to 40 of those. What. Might that tell you about the plan that you're using well number one it might tell you that you just misread, market. Conditions, but. It might also tell you that the plan itself might need a refinement let's say that you, got stopped out 40 times the stuff you're, you're, putting your stops in they. Keep getting triggered and then. The stocks rally well maybe those. Stops are too tight, or. Let's. Say you're looking at your, journal. In hindsight or, you're looking at your account in hindsight and you notice all right so we did 50. Round-trip, trades and, of. The 50 that I exited. Looks. Like I did the right thing in 40. Of those. Examples, so okay good, but. Is it, possible that maybe we should have gotten out even a little bit earlier and that may. Cause a plan to be revisited but, that's the sort of thing that an, investor, or a trader might be looking for as they're, reviewing their plans on a quarterly basis, where can refinements. Be made based on the data set that I've accomplished, since. The quarter started, do I need to make. Any changes, all. Right but that is, your sample investing. Plan this is just an, example of, how a trader might add structure. Pulling. Together the, elements, of, what we've covered over the course of our last eight. Lessons so we've. Accomplished, what I set out to do we. Just wanted to talk about how to construct an investing, plan and then show one as an example so, that you come away with an understanding of how you. Might create your own set of guidelines, or rules a plan for, investing. Everybody. Thanks. For joining me let's see Bruce says this is great for stocks is there a similar sample, plan for trading I'm sure as Bruce yeah with each of our courses, you'll. Notice that there are sample investing, plans attending, to those you just look under that resources, area every one of our courses has that yeah, go check that out at. Least I believe I let, me qualify that I think every one of our courses, anyway. Check it out yes there is one for options. Everybody. Time for me to set you loose. A quick. Reminder though we did use some real, examples in today's discussion it's not a recommendation or endorsement, of those securities, or those strategies, and.
I Do want to give you an invitation one last time if you if you don't follow me yet on Twitter jot, this down at. Sea. For Cameron C May. Underscore. TDA I try to post something every. Day on Twitter try, to give you some market. Observations. Or tell, you something personal about myself show. You what I did for the weekend, I like that kind of stuff so, Dave. Thank you very much appreciated. Everybody. We're, gonna take a little bit of a break in our education, broadcast, day we're coming, up next is gonna be Pat Molly he's gonna be talking about trading, with ETFs, that starts at 12:30 Eastern Standard, Time now, we've. Finished. Our eight lessons. For. Getting started with technical. Analysis, if you, feel like it's time to move on to the next level we. Have another series. That's called advanced. Charting, techniques, also. Top pipe by Pat Mullaly interestingly enough that one's at two o'clock Eastern, Standard Time on Fridays, you might, want to check that one out all. Right but of course you're also welcome to come back and join me again we're gonna do this again next week, we're really going to be getting back to the very basics, of technical. Analysis, we're just gonna be talking about why. Do we do technical, analysis what it will what. Motivates a an investor. To use charts in their trading all. Right so. Rob. Perfect, thank you yeah, Rob says got your Twitter followed you excellent. Thank. You Rob Donnie you're welcome, everybody. Go enjoy Pat's, presentation. Thanks for being here today I look forward to seeing you next week of, course you have my invitation, to join me in, any of my other regularly, scheduled sessions throughout, the week but whenever I see you again until that moment arrives I want to wish you the very best of luck happy, investing well bye. You.
2019-09-15 01:13
