Trading Futures | Ken Rose, CMT MBA | 1-25-21 | Trading the Breakout
hello investors so interesting day in the market seems to be shaping up here you know last night the futures were up relatively strong this morning they were actually down somewhat it looks like they're making a recovery and how about technology stocks hello investors again welcome to trading futures my name is ken rose and as always it's great to be here to discuss investing in the stock market particularly in this futures area so for those of you that were expecting john to be here this morning john is here he's in the chat windows having a little bit of a difficulty with his voice here so we decided to trade places here today just a reminder you can follow me on twitter my twitter handle is at krosc underscore tda excuse me where i post things related to this area as well as other areas of investing i also encourage you to follow john i'm sure i'm sure most all of you if not all of you are currently following john on twitter as well that's at j mcenroe underscore td and i'm sure john would be more happy to send over that twitter handle information to you via the chat window in wave disclosures here today just a reminder that we in here we use the we use a paper trading account and any level of success that we may have in our paper trading account isn't necessarily indicative of the success you have in your actual live trading account as market conditions do change continuously we also use actual symbols but you do want to keep in mind that we're not making recommendations or or or or endorsements or anything like that with regards to using individual symbols for individual traders you want to keep in mind that any investment decision you make in your self-directed account is solely your responsibility occasionally in here we'll trade options to keep in mind that options trading is not for everyone because the leverage and the risk associated with options trading so here's a picture of the greeks we may be discussing some of these greeks delta gamma vega and theta as we go along as we use some of these well i will have a little bit of discussion of the greeks in the event we go into those particular areas here's a picture myself i specialize in blending both fundamental analysis with technical analysis i love to learn this stuff that's one of the things i enjoy about the work that i do there's always opportunities to learn new stuff and i love to learn i love to teach this i also love to trade it as well i'm a contributor on the td ameritrade network i'm a charter market technician and i work with things scripting building indicators triggers and strategies and the like with regards to our agenda here today what i thought we'd do is just start off with an overview of the market we'll take a look at some of the major indices some of the indications with regards to levels of fear or levels of confidence in the market we'll do an overview of some of the futures contracts we have available to us here on the thinkorswim platform and doing an overview of those we'll take a look for some potential setups for some potential future trades and then we'll go ahead and look to enter in as some paper trades here so with that i'm going to go ahead and bring up the thinkorswim platform but before i do that i do want to take a look at this right here for those of you that may not be familiar with futures or perhaps this is your first time to our futures webcast it is your first time i want to welcome you here great to have you here if you do feel over overwhelmed at times i just want to show you some additional resources i do try to craft our presentation here and use words and do it in such a way that it will be beneficial to everyone so definitely welcome and great to have you here for additional resources though in case you do feel a little bit overwhelmed in some of our discussion and presentation here today you come over here to the td ameritrade website and on the td ameritrade website if you come up here to education just roll over education and come down over here to the education center and come down here and select futures and when you when you come over here and select this area you notice that there's a little futures course right here you've got fundamentals of futures trading there's also a lot of short videos explaining the futures market investing basic futures now these are these are five ten minute videos of course here it's it's estimated to take you somewhere in the neighborhood of about one and a half to two hours if you have familiarity with futures it's probably going to be less than that if you don't have familiarity futures it's probably going to be pretty close to that if you come down here look at all these other additional videos you have here fundamentals of futures beginners u.s treasury futures a lot of a lot of great stuff here looks like we also have one here on hedging with futures tips for surviving a market sell-off and oftentimes futures are used as a hedge for those types of situations also let me come up here and just click right here let's see can we get back over here to the top of our page let's come back here thing right here just just one other area of resource available to you if you come up here to education and you come down here and click click point to and click on webcast when you click on webcast this page will come up i'm going to update that page let's go ahead and click on webcast here education webcast last week we didn't have monday because of the holiday but this should have monday when this page comes up you can sign up for webcasts that are upcoming you can go in and look at completed webcasts or archive you can also come in here and check out the webcast calendar i'm just going to go ahead and click on webcast calendar right here and a lot of times when we're doing futures trading we'll use a fair amount of technical analysis i just wanted to show you some uh some resources here in relationship to that we do have a technical analysis videos and the like they're available to you on the education tab but also on mondays here you have getting started with technical analysis which which cameron may teach us he does a great job with that and then as you come down through here you'll see some other courses where technical analysis is mentioned and so you may also want to consider taking a look at those because a large amount of technical analysis is done as it relates to futures trading well with that let's come back over here to the thinkorswim platform and kind of get an idea of what's going on so here we have the four size cs futures it looks like right now we're up about a quarter of a percent this has been kind of going up and down throughout the night i know i know late late last night i was looking at the futures and we were up we were up about the same but then as the night progressed we actually moved down a little bit but it looks like we're now in positive territory but something that's interesting here as you look at our s p 500 futures right here is is a somewhat level nature of things basically been trading sideways here for the last three or four trading days we've sort of been in this sideways range as well coming along coming along like this so when you're looking at some different strategies and you look at the s p 500 we can see a fair amount of possibilities with regards to to strategies that would relate to a sideways a sideways trading stock and a lot of these strategies are going to be are going to be related to options options oriented and with regards to potentially neutral movement of course not all our features are going to look like this but we may see we may see several like this event we do we could look at sideways strategies things like perhaps calendars iron condors and those types of things but let's look at some other ones here i'm going to open up here and before we do that let's also take a look at our sectors here because this can kind of give us a heads up of how things are going here today so this is a watch list of s p 500 sector stocks and we have energy and materials industrials and the like and we can do is we can come in here and sort by this list and bring the strongest ones up to the top and or we can bring the weakest ones up to the top depending on what our interest is but it looks like right now infotech is up is up almost one and a half percent which would kind of indicate that we may want to if we're looking at a bullish trade we may want to look at the nasdaq futures because that is a that is a heavily technology weighted index it looks like communication services is also up strong this is this can be considered by some to be part of the technology area as well it's up strong it's also interesting to see consumer discretionary futures up here strong here today now the reason i say that is because if you if you think about consumer discretionary stocks consumer discretionary stocks are are stocks that represent companies that provide goods and services that we can choose we can use our discretion in purchasing them we we don't need to be purchasing them these would be things like automobiles home appliances you know one way that i look at it is is this something that i could have repaired or is this something that i could buy new if it's something that you may consider having repaired it probably falls in this area of consumer discretionary goods and the reason i think this is interesting of course this is just a single day and we'll look at things from a little bit of a longer time frame here in just a moment but if you have consumer discretionary as being one of your leading sectors then that does indicate a certain level of confidence with regards to the overall economy because if the forecast is for these sectors to do well then that would mean that consumers that can practice discretion are being a little bit more aggressive in their buying or that or that at least is the forecast if you have consumers going out and looking at purchasing those consumer discretionary goods rather than like consumer staples that does indicate some a particular bullishness or particular consumer sentiment that would be considered to be relatively strong which would be good for the market from a bullish standpoint this is just a single day though it's also interesting to see utilities is right there with it which the reason i say this is interesting is because utilities is usually one of those areas that does well when there isn't a lot of strong consumer sentiment investors that purchase utility stocks they're usually gonna that's that tends to be a safe haven because when you think about it if you're if you're looking at uh paying paying if you're looking at paying for things on a monthly basis you're probably gonna take care of your heating and your and your fuel and your electricity you're probably to take care of those first because you want to you want your home to be comfortable and so we have we have one that is we have the consumer discretionary which is bullish we have the utilities which is a little bit more on the bearish side utilities could be could be moving up here um in the event that in the in the event that it's forecasted that interest rates could be moving to the downside interest rates are awfully low but if they're showing a little bit weakness today i assume that's a possibility then that's probably is part of the reason that utilities are popping up here popping up here to the upside then you have energy down here just kind of getting hammered today up down over 2 2 financials down and industrials down this is interesting as well because these three right here probably i i would say led the market those three they're the primary led the market all the way up to this point right here then they started to fade here and it doesn't look like their position with regards to market leadership has improved since they started to fade at this particular point right here so with that then we again i'm thinking when we look at some of these other future contracts we're probably going to see the future contract for the nasdaq to be a little bit more impressive than what we're seeing here with regards to forward slash es one other column that i have here which i think is beneficial not only from a stock trading standpoint but also from a futures trading standpoint just to give us an idea of where we have strength in the market is we can use a percent change column here and this is a this is a column that we can customize try to go back a certain amount of time in the past to see what has been performing the strongest during that time frame for example here on slash es notice we came down here and we bottomed right here then since then we've been moving up of course we're going to be honest with ourselves we had a couple strong days of the upside then we moved basically sideways for the last three days but if we wanted to measure percentage performance during this current move we could come right here and use our channel tool here and just put it over that the current candle right there and then bring it back to where we bottomed out previously and that'll show us the number of bars but you can see that that number of bars is just off the screen so let's try that again and i'm going to start down here so we have more room and oh isn't that tricky how that's doing that it's kind of getting is that going to do it for us maybe they'll do for us right there so it looks like we have six bars so so what that means in our percentage change column here we would take that number which includes today because it includes today would subtract one from it we would go back five bars right here and so i've got my percent change column here to bring that percent change column up here you just come over here and click on up here where it says symbol and they're assembled choose customize then over here click on percent you'll see this percentage change and you can add the item and move it over here once it's over here then you can scroll over to the right and click on this little down arrow right here and set the length and we were we're looking at six total bars we take one away from that and we use five again the reason that we use five is because the way this works it starts here doesn't count today as it starts here then it counts back to that point right there so let's sort these and see what we see over this current run where is the strength going looks like over the current run that we we have the same top two as today and we have communication services and information technology is the top two they've switched places when you look at that longer run we also have consumer discretionary basically in its same place then we have real estate here okay and where are we at here with that then we have utilities down in this area right here so we are seeing some good strength here in the technology area and also in the consumer discretionary area we can we can take that and and take it into consideration with regards to what we're doing again with utilities popping up here a little bit i'm thinking if we looked at some of the interest rate stuff that the interest rates are are possibly moving down a little bit pushing these you pushing the utility sector up a little bit in fact what we got here's a forward slash tnx or just dollar sign tnx i'm let's try this well let's try something else i'm going to go to something different here see if we get the public watch let's see if it gives us currently what's going on with interest rates right here yeah that isn't quite loading here yet this morning this having a little bit of a hard time waking up here but maybe we can capture some of these symbols here and see if this could give us a clue this is the 30-year and i don't know if it includes today yet or not it doesn't look like it does just yet a lot of times see these are posted following the end of the trading day so but we won't get too far along we won't we won't go we won't go in that area too much let's just pull up our futures and take a look at the futures contracts we have here and look at some of these possibilities okay so we looked at uh we looked at forward slash es i'm also going to take a look at one other place and that is with regards to overview of the market that's just to look at the vix here to see what's going on with the vix this this is this is giving us sort of a gauge of the level of confidence that investors are are having a level of fear that investors are having and this is basically just the implied volatility on the s p 500 cash options and the the higher that implied volatility goes the this the stronger the fear is said to be because implied volatility is basically a measure of supply and demand for the underlying options and if the demand is great for the s p 500 cash options that tends to occur when there's a significant amount of hedging going on so when demand is great that pushes implied volatility up and we have a situation like this with regards to the vix which again is just a measurement of the implied volatility in the s p 500 option so this would be this this would be a high level of fear right here okay that would be high we've come down here and on this particular time frame which is three months in a day this would be considered to be in this time frame this would be a low amount of fear and a higher level of confidence however we've had an unusual time here over the last year or so so looking at this index what many investors will do they'll go out maybe maybe two to five years so we'll come up here to where it says day and click on day here and we'll come down here and click on time frame and we'll go out a couple of years here now we can see that this is sort of more more normal i guess you could say normal there's still some volatility where we pop out of it and then this is covert i mean how many times do we have covet occur maybe once in a generation if that much this is highly unusual something like this could have could occur again have some significant bumps here along the way but we're at right now where it's high in relationship to the cove and everything related to that well and what i meant to say while it's relatively low in relationship to covet is still relatively high in relationship to where the implied volatility has typically been pre-covered which which if we're looking at possibly doing options would indicate that there could still be some possible unique opportunities with regards to option strategies where you're selling options you know things like calendars and diagonals and and verticals and the like for purposes of our trading here because primarily with regards to futures we're trading shorter time frames i'm going to come back up here and change our time frame here and we'll go back to a three month chart there and i just want to come back over here make sure we're touching all the bases we wanted to so kind of done an overview of the market see what's going on now we want to do an overview some futures and then looking at some of the futures we're going to be taking a look at for some potential setups in relationship to that so these are these are the futures i just put together this futures list and basically all i did was i i brought up our paper trading account here and i put in future symbols to see which one of those symbols i would get i would get quotes and and and bids and those types this is a paper trading account so it may be a little bit limited i do feel we we have a significant number of future contracts here that are available to us i'd like to do is start off with the um the uh the the the the index futures and we've taken a look at the s p 500 so let's come down here and look at the dow it's looking if we look at these from a percentage standpoint there's our s p up a little bit less than a quarter percent the dow is down a little bit more than half a percent and this is what we're somewhat expecting is that the nasdaq futures are up fairly strong we also have a potential breakout signal here on the nasdaq we can take a look at that and possibly a trade related to that but let's come over here and take a look at the dow futures right here and see what this looks like so looking at the dow futures one thing that kind of jumps out to you from a technician's standpoint on the dow futures is this sideways nature right here if i grab a little price marker here and come across the tops right here like so and i come across the bottom right here like so you can see we're kind of moving along in a sideways channel we're moving down towards the bottom of the channel now since we're down at the bottom of the channel what what some investors may consider doing is is to maybe do a a short put vertical down here i could possibly be doing a short put vertical while we're down here at the bottom side of the channel not a short put vertical possibly going out somewhere in the neighborhood of oh 30 maybe 30 to 40 days and then look for a bounce when we get up here to the top part if we get up to the top part up there then go ahead at that point do a short call vertical and perhaps by the time we get to the top point up there perhaps we have in our perhaps we have about 25 maybe 25 to 35 days left which should be we should be in this in this relatively high level of implied volatility which which could very well be enough to give us a a respectable premium both to the downside and to the upside of course this is a fairly narrow range and you can see that we just about go within that range over the period of just one or two days it's because of the narrowest narrowness of the range there'd be some investors just go ahead and feel comfortable putting both of those on at the same time and of course both of those together would be considered to be an iron condor on that there would be some other strategies as well to take into consideration you could possibly do a calendar and open it up so you had your breakeven points here and you break even points there you know diagonal might be a possibility as well so that's something then we come down here to our nasdaq and let's see we got going on here i'm going to notice right here i've got this little breakout column here but by the way this this is a this is a customized column i see a lot of familiar names over there in the chat window so i want to welcome everybody here today it's it's good to see you again okay i mean i would say most of you probably have this little breakout customized column here if you don't and you've this first time you've seen it do feel free to contact me on twitter and i'll be more than happy to get that out to you along with a little twit along with a little video on how to load that up but looking at this though let's pull up the e-mini here for the nasdaq and see what this looks like and i'm going to go ahead it looks looks like we actually have had a a couple of breakouts here recently on the nasdaq in fact the nasdaq's had sort of a nice little record here with regards to breakouts notice that we have this little breakout here but also if you notice up here we're going 2 days two days uh horizontal looks like we're getting another breakout here today so on something like this we could also do a you know maybe a if we're rather bullish on this we could possibly explore doing a doing a long vertical on this if we want to be a little a little bit more aggressive where we could kind of assess the target moving up to the upside and do a long vertical or we could just take a long position in the futures contract and use our atr to give us a target up here and also use our atr to manage risk with regards to the downside i'm looking at some of the other contracts we have over here with regards to futures i'm not seeing anything here with regards to breakouts and like why let's go ahead and start off with this let's start off with a paper trade here on the on the e-minis here and then perhaps we'll look at some of the other contracts we'll kind of play it by ear to see how much time we have as we are going along here okay i'm going to go ahead i'm going to take this off of here this little horizontal line we'll remove that drawing and i'm going to look at this move right here notice this we came in here we came up here and then we pulled down here now we're moving up again in order to establish a target up there to the upside because it because i'm you know looking at this index it looks to me like we could be at all-time highs let's look for a confirmation that i'm going to come up here where i can set my time frame and come down here to time frame and here where it says aggregation day and it has three months i can take this three months and say max available and look at this chart and yeah it looks like we're definitely at all-time highs here we're going to come back in here we'll change our time frame back down to three months like so so we we can use a we can use fibonacci extensions to establish targets to the upside that would be one way to do it we can also use price patterns to establish targets to the upside i'm thinking the most recent price pattern here would be this little bull flag right here but i think we've already surpassed that and and in in looking and measuring that target we can just grab a come down here and grab a little trend line right here and say okay right here that is our flag pole and that's our flag and notice we had a breakout right there of our flag so to if we're going to use price pattern to establish our target come over here and can i grab that little pole right there let's try that again we'll duplicate our poll and we'll just move it over here and extrapolate that up you can see using that we're pretty much up to our target very very closely which could mean that we could run into a level of resistance there that's a possibility okay but we're we're just we're just kind of moving in on that target let's look at it let's look at another tar and let's look at creating a target another way perhaps getting something a little bit further up there and to do that we can use fibonacci extensions and what i'm going to do here for our fibonacci extension is usually when you're using fibonacci extensions you you want to look at the most recently completed run that includes both a trough and a peak and so i'm going to use this one right here because this one here isn't completed right because we haven't pulled back but on here we do have a pullback and down here we have a bounce so this would be our low down here okay this would be our high up here so we can do fibonacci's fibonacci extension starting here moving down here and then look at some targets from the fed line fib lines going up from there so come over here and grab this tool right here this click on your your drawing set right here then come up here and this one right here is fibonacci retracements okay so when you actually select fibonacci retracements you can go to your most recently completed peak completed peak because we had a pull down from it start there and then come down here where we were going to take a look at where our low was and i believe we're looking at our low down in this area right here before we got our bounce could go all the way back down here but this is kind of busy i think our this is more in line with our current trend that we're in and then this gives us a target of 168 up there the 13906 level what i'm going to do is i'm going to modify this a little bit because it looks pretty busy up there doesn't it do edit properties and we're just going to take the check marks off all of these because we're just primarily interested in our target up there at the top okay so there's there's our target on our bounce and this is where we're currently at so let's take a look at the contract here then and see what we got come in here to trade first of all i want to open this up go into futures here and so it looks like on the e-minis right here looks like the tick size is 25 cents the tick size is five bucks it's going to be about twenty dollars a point right because what we can do if we want to do the math we could take a calculator here and go one point divided by 0.25 gives you four ticks a point in each one of those ticks is five bucks so each point is going to be twenty dollars and we're breaking through this point right here so let's assess this we had those two horizontal days so that is our breakout point right there and i just want to i want us to be able to see that on the right answer 1313417 so if we go up and hit our target then what level of profitability are we looking at as far as going from this point up and hitting our target let's grab our calculator again and just say okay if we come up here and hit our target at 1 3 906 and we enter in on this trade at one three four one seven and we have 489 points times twenty dollars 9780 so we'll just put that in here that's our target where do we want to set our stop loss on this then well you know there's different tools we can use to set our stop loss we can do a percent of the price and the like if you want to tie your stop loss in to the actual volatility of the underlying security then the average true range is an excellent tool to do that because average true range is just giving us it's giving us an idea of the range of the stock moves in on a day-by-day basis going back 14 periods and it and it does include gaps so we can also use average to range for targets as well but let's do this for for for this one let's look at using our average true range it looks like the average true range is currently i just want to get that so we see our average two range is currently at 204 so why don't we go with um we're already breaking above that resistance level i'm thinking to give it to give it plenty of room because this you know this this thing can be fairly volatile why don't we go with um we'll play the part of the investor that wants that wants to give it plenty of room up here is looking at is looking at a nice trend we're just breaking out today but wants to give it plenty of room so it's going to do one and a half atrs with regards to a stop loss take to get out of the trade now you want to keep in mind the stop losses are not guaranteed to work you know they may work but they're not guaranteed to work as far as getting you out at precisely the point where you put your stop-loss in because a lot of things have to happen you have to get filled you have to get filled in a in a reasonable amount of time that doesn't always happen you know there are some roadblocks that can occur if we set our stop loss then let's see what that would look like setting our stop loss at that point we kind of get an idea of our our reward to risk so our average to range then is 204 so i'm going to take 204 here i'm going to multiply that by 1.5 we want to be 306 points below this theoretical support level that you know the breakout point is a theoretical support level you can find the difference between that and that support level which is it one three four one seven so we're stop loss then it would be set at i'm just going to write this down one three one one one so theoretically how much risk do we have in the trade here you know i may have to come i i'm going to recalculate our profit because i may have gone with this rather than where we're currently at so i'll come back in and recalculate that profit just to make sure let's start off here then so if one three five and that's moving around right let's go one three five four two minus where we set our stop is going to be one three one one one is 431 points we're gonna times that by twenty dollars that puts us at risk at eight thousand six hundred and twenty i wanna recalculate our profit though because i'm not sure i use the current price i may have used at stop loss level i just want to double check that so if we come up here and we hit our target then of one three nine o six and we enter in at one three five three six one three five that thing's bouncing around one three five three oh we've got 376 points to the upside so we'll times that by twenty dollars that is seven thousand five 520. of course where we get filled on this could could happen it could have an impact on our numbers but one of the things that kind of jumps out to you when you're looking at this is we're risking more than we stand to gain right just based on those numbers our potential profit again this is changing okay so these aren't going to be exact because that's changing as we talk but our potential profit to the upside would currently be about 7 520 that's our potential reward and our risk on the other hand is going to be was i think it was like eight thousand six hundred and twenty so is this a good trade we're looking at this investors would this be a good trade well if this is a if if if this is a good trade then um you know we're basically looking at risking more than more than we more than we stand to make so is is this a good trade the reality is that's going to be that's going to be sitting in your trading journal there can actually be a good thing about this relationship that is that from strictly from a statistical standpoint we have a greater probability of making our profit than we have of incurring our loss if you look at things strictly from a statistical standpoint if your reward is greater than your risk you have a greater statistical probability of getting of getting stopped out than you do of hitting your goal okay however straight statistics doesn't take into consideration price patterns and the like okay so just because a statistical measurement suggests something doesn't mean that you're not doesn't need doesn't mean that you may not be in a in a position where you can outperform that okay i just want to come over here and look over there in the chat window see if we got any questions and let's see if as an example you were looking at a risk of of one to two reward yeah so we're not we're not looking at that right now are we we're looking at a reward that is actually less than our risk we're going to play the part of the investor that's actually okay with this and why is the investor okay with this because the investor is looking at it from the standpoint of a probability standpoint we're from a statistical probability we have a greater statistical potential coming up here and hitting our goal than we do of coming down here and getting stopped out is that the best way to do it not necessarily where would we make that determination would make that determination by looking at our trading journal maybe doing some of these and maybe and then maybe looking at it from another perspective okay so let's go ahead and put together a little order here then and in doing this we'll come back here and review our numbers here because i think it's always beneficial to to do to duplicate things you know look at it and run the calculation and do it again and again um i did want to call your attention to one other measurement we have or this is a proprietary tool that's available to you as a td ameritrade client and that's our market forecast line right here and this is just kind of giving you an idea of what of of the of the likelihood that this trend is going to cease and the way that it's used this tool is you look at the green line right here that's referred to as an intermediate line when that intermediate line crosses down out of the overbought zone after okay after you have what's called a bearish cluster then that could indicate that the trend is over is it guaranteed no it's not look right here that intermediate line broke out of that overbought zone that's part of this pullback right here did we come up roll over to lower high and go down no we didn't but what i would suggest you do is to is to maybe pull this up and then maybe look at the nasdaq maybe look at the s p 500 look at how frequently when the intermediate line drops out of that up reversal zone how the trend on the underlying index does break down okay it's not perfect but it but it is interesting um uh the the percentage times that it does forecast a change with regards to the overall trend right now though we are well above that overbought zone and we can stay in that overbought zone for a long period of time right notice how long we're we're in here as an underlying security continues to make higher highs and higher lows let's go ahead and look at our order here then and to do that i'm just going to do it right here from our chart okay i'm gonna do right click here and we're gonna choose buy custom and i'm gonna i'm gonna use an oc order i'm gonna do by custom with an oco bracket so we're entering in we're gonna put in a target price to get out at and then we're going to put a stop price to get out as we either get out at our target or or else we get out at our stop so we'll do oco bracket now there are there are some different ways to do this i understand that okay i'm just i'm going to do it this way because i think it's a little bit more intuitive than some of the other tools that you have available to you but if you like to use the the active trader mode and do it that that is fine as well okay so here we have our here we have our order to enter okay looks like again this thing's kind of bounced around a little bit i'm going to take the padlock off there so i'm going to change these two here to good till cancelled one is going to be at our target the limit order will be at our target because the limit order says okay i want to go ahead and buy this now well well let me see let me yeah let's first first of all our first order to enter in we'll leave that as a limit okay but effectively when a limit order goes in it is a market order when it goes in the price fluctuates around a little bit then we may or may not get filled but i'm just seeing that 325 one way you can just look at the price up here and just see if it moves with that it looks like it does i'm going to come over here i actually want to come over here to the well let's let's go ahead and stay here for now then we'll then we'll double check some i was going to say maybe i want to go over to the trade page so i can just look at the bid and the ask because we're doing this but i want to be able to see our targets here we'll put in our targets and we'll take a look at this limit order so target to the upside is one three nine o six and this comes in the the ticks on this is 25. let's go with 13906.50
that's about as close as we can get to that 6 2. so right here our first limit order we'll put that in at 1 3 906.5 okay and we'll come down here and our stop order i should you know i should have taken it taken a second and put another horizontal line in here just so we can see it easy but i did write it down and what i have written down here is one three one one one okay there's our stop we have that set up our limit i just want to open up our limit here for a second oh i was afraid of that yeah well actually it looks like we're in good shape you know some uh sometimes when you make adjustments to your entry order will automatically adjust these guys down here and it you know it and it actually did adjust those yeah they're moving around again let's go ahead and lock this in at one three five seventeen walking at one seven now this is bouncing around in fact i'm gonna come up here just a little bit to one because when we were looking at it earlier i think we're looking at 1 3 5 20 something so let's come up here to 1 3 5 20 one i'm going to lock it in there because locking that in there will lock these guys in here and then this is going to be 1-3 put this one in again at one three nine zero six point five and then down here we'll go with one three one one one okay one one one quick review of our numbers here then as we're going to set this in then profitability the upside is going to be 1 three nine o six point five that's where we set our target up here minus where we're going to be entering in at one three five two one three five two one 385 will times that by our twenty dollars point and the shifting around a little bit so it's seven seven one oh that's our reward and then just one more review of our risk we entering in at we're looking to enter in at one three five two one and then if we get taken out again there's no guarantee we get taken out just this level we may get taken out a level lower than that if this thing gaps we'll get filled where the gap is at if it's lower than this minus one three one one one equals that times that by 20 bucks that's that's basically the reward risk relationship we're looking at the numbers are a little bit different but the relationship's pretty much the same so with that this thing's bounced around a little bit we'll look for it to bounce back down to about one three five two one in order for our order to get filled we looked at our risk and our risk on this was a little bit over eight thousand dollars let's play the party investor that's okay with just one of these okay sending that in if we want to tighten things up a little bit we can see if there are some micros available on this one just just to make to tighten these up but if we're okay with eight ten thousand dollars of risk would be okay with this one so we'll do a confirm here and after confirmation we can see all of our transaction costs because we haven't discussed our transaction costs as part of our reward and risk so you do want to keep our your transaction costs in mind on these and these are these are transaction costs of course it's the first order and then if either one of those other orders are filled in would have additional transaction cost here so i'm going to shift gears on this one and let me put this in my holding center that's why i put trades that are part of substitutions and we'll go ahead and send it in and see if we get filled yeah it looks like we were filled so we have our long position there then we have our stop losses in relationship to that so what we're also going to be looking at possibly doing something here on the dao sort of a sideways movement here looks like we're moving up a little bit closer to the midpoint here so let's explore the dow here for a potential um option trade and to keep it to keep a little bit on this a little bit more on the simple side why don't we look at an iron condor i think that's a little bit more intuitive than like a calendar or a diagonal you know some of those other ones let's identify our resistance and our support areas here so i'm going to choose edit properties and we want to get a price over there to the right so on our if we're going to do an iron condor we want our calls to be above the the 31160 and let's edit this one so we can see the price on this one over to the right and we want our puts to be below 305.61 okay so calls above 31160 and our puts below 305 61.
we'll come up here to the trade page and it looks like we have options 53 days out so we don't have weeklies or anything like that we're going out there ways aren't we i'm curious on micros if we got anything we don't have any any options on the micros minis um well let's go ahead and and we'll we'll go ahead with 53 days out and maybe maybe we'll go out a little bit further to give it some additional room on that but you know yeah i'm a little bit leery about going out that far because that's that's asking this thing to stay sideways for a long time and it's already been sideways for quite a while so maybe we'll hold off on that just because of what we have available to us perhaps on the s p 500 do we have we do have weeklies here on the on the e-minis right here it's not it's not as sideways as the dow is though isn't in fact i'm yeah i'm just not this is this has been in a you know a rough and rollicking um uptrend here of late hasn't it we're here to the dell let's see how far out how far out we can get here so get a decent return i mean maybe if we can get a ways out here we'd be okay with it we'll just look at a quick example here then we'll go ahead and wrap things up here today folks so compared to trade and come down here definitely not a shortage of contracts here delta so one thing to look at on these and this just like just using the deltas may take us a way out there would like to have our probability of success to be greater than 50 percent and when you're looking at an iron condor the one way to calculate the probability of success is to add up the deltas for the two short legs and look at that as the probability of failure so we want the two short legs of the deltas to add up to something that's less than 50 so our probability of failure will be less than our probability of success so in order for that to occur we'd want to be looking at something that's less a delta that's less than 25 let's come out here to a delta of 20. that puts us at 34 30 32 40 right here and let's just see what this would look like then we'll go right click here and i'm not seeing a sell option here maybe we're not going to do this because of limitations we have in our paper trading account yeah i got buy custom sale custom yeah i'm not getting anything here can i do it manually if i click this call is not tradable okay yeah sometimes you just run it run into some limitations here in our paper trading account so that's that's that that's okay why don't we go ahead and wrap up our discussion here then today um we do have well and we're just we're run a little bit tight on time so we'll finish a little bit early here okay rather than go a little bit late let's go ahead and do that alrighty folks so let's come back over here then i do want to come over and see we have over here in the chat window yeah looks like john's been doing a great job over there with questions thanks john appreciate that so what did we talk about here today well we did a we did an overview of the market kind of looking where we had strength where we had weakness we identified technology as being a rather strong area and in looking at that we opted to do a we opted just to take a long position on the on on the nasdaq futures we managed our risk uh using the average true range we looked at our target using fibonacci extensions and we looked at that as a potential setup because we were having a breakout on those when we went ahead and we entered in the paper trade that we were looking at there all righty everybody well hey um again just a reminder you can follow myself on twitter that's going to be at krosc underscore tda you can follow john on twitter as well i'm sure most of you if not all of you currently follow john on twitter if not i highly recommend that you do he has a lot of nice posts over there particularly related to his his his um activities in the service of our of our country here which is which is some great fascinating post that he puts over there in wave disclosure here today just reminded that in order to demonstrate the functionality of the platform we need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility thanks everybody for joining us here today for trading futures uh next week i fully anticipate that john will be back up and running his voice will be recovered at least we're all hoping that hoping for that right best of success in your investing and just reminder to be safe and to be careful out there we've got the vaccine coming on and everything else this would be a like the worst time to get sick so do be careful let's get on the other side of the whole covert thing as happy and healthy investors bye everybody thanks again and hope to see you next time you
2021-01-28 22:09
