Trading Technicals | Short Verticals
hello investors and welcome to our session here today so interesting taking a look at the market or last little while recently if you look at the major indices they've all broken through a significant resistance levels when we have these kinds of breakouts what type of strategies would come to mind and how would we implement those strategies that'll be a focus for our discussion today before we get started with those let's go ahead and pop through our disclosures here today again you want to welcome you here to short verticals my name is ken rose and it's always great to be here to discuss investing in the stock market particularly in this area where we can engage in some high probability trades using this particular strategy just a little reminder you can follow me on twitter my twitter handle is at krosc underscore tda and i post things on twitter related to this area as well as other areas of investing just glance over there in the chat when it looks like we have john nicholl here with us today as well great to have john here with us today i encourage you all to follow john on twitter as well as he posts some great information i'm sure he'd be more than happy to send his twitter contact information to you over there in the chat window in wave disclosures here today investors do be mindful that our content is intended for educational informational purposes only it's not investment advice or recommendation of any security strategy or account type spreads and strategies other multi-leg options strategies can entail substantial transaction costs including multiple commissions which may impact any potential return because they're short-lived instruments weekly option positions do require close monitoring we also use the paper money software application here this is for educational purposes only we want to keep in mind that successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions do change continuously now in here because this because we use a short vertical strategy we do have short options do keep in mind these short options can be assigned at any time up to expiration regardless of the end of money amount and in the money option has a higher risk of being assigned early it's important to keep that in mind because the paper money virtual trading application will not assign a short position earning which is different from what could occur in a actual real life trading account also be mindful investors that carrying an option position into expiration can entail additional risk for example an unanticipated exercise assignment event could occur or an anticipated event may fail to occur and in order to demonstrate the functionality of the platform we need to use actual symbols however to ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your subject account is solely your responsibility well there's a picture of myself i don't know if that's my best picture it's a picture anyway but but in lines with it's just this just in wave introduction i guess you could say is that i i specialize in blending with fundamental analysis with technical analysis i'm also a contributor on the td ameritrade network i'm also a chartered market technician and i work with things scripting building indicators triggers and strategies on the line so investors what i'd like to do here today is what we'll do is we'll start off by taking a look at the major indices in order to formulate what our posture is generally when we're talking about our posture we're talking about are we bullish are we bearish are we neutral are we somewhere in between are we are we possibly neutral berries or neutral bullies and taking that into consideration that will help us determine what type of short vertical that we'll be engaging in here today let's go ahead and do that to do that i'm going to bring up the thinkorswim platform right here notice to begin with i have the s p 500 brought up right here this is the spx that follows any index that follows the s p 500 one of the things that kind of jumps out to you as you see right back here we're basically in a downtrend here where the if we're looking at the highs the highs are getting lower you look at this high it's lower than this high slower than this high and we can also see that the lows were getting lower as well but then we broke out of this site out of this downtrending channel right here and then breaking out of that sideway and breaking out of that downtrending channel we have this significant area of resistance over here that the underlying index had gone up and it hit five days in a row without breaking through and then it broke down well you can see right over here we had a breakout of that resistance level right there and in breaking out of that resistance level that also broke us out of the downtrending channel now we've come up here and we're starting to show a little bit of weakness here today so that's what we got going on with the spx so does that mean does does that does that mean at this particular point in time we want to tailor everything to a breakout type of a market not necessarily we also want to look at some of the other major indices the s p 500 of course is an indices that represents large cap multinational companies by and large that's one we also want to take a look at the nasdaq it's a little bit more technology oriented and we'll take a look at the russell which is which is primarily a small cap index just kind of get an idea if this if this breakout a little bit of a pause and test here there's a little bit more prevailing in the overall market so let's pull up up the nasdaq here we'll bring that up here and that's going to be our ndx and once again we can see here that we're breaking out this resistance level right here we got a little bit of a pause here this these these two candlesticks right here candlestick one and candlestick two those two together actually giving us what's called a bearish harami that's where you have a large green candlestick and then the next day you have a small body candlestick that small body candlestick is completely engulfed by the previous day's candlestick it does represent a change in direction the downside not necessarily a change in trend just a potential move to the downside and a possible test of this resistance level right here finally let's come over here and take a look at the russell our ut this is the small cap index and here once again we can see we basically see the same thing there's that resistance level we had we broke out of that resistance level and on on the russell's a little bit different in the in that we come all the way down and we're testing this right now we've tested it for one two three four days without breaking through it'll be interesting to see if we break through by the end of today's trading which is a possibility or is this going to hold and possibly will bounce and start to move to the upside well in assessing these things one of the one one one another index that we can look at that will kind of give us a gauge with regards to fear that's going on in the market currently would be the vix now the vix is sometimes referred to as a feared gauge when the vix is relatively high fear is relatively high when the vix is relatively low then fear is relatively low basically what the vix is it's just a measurement of the implied volatility on the s p 500 cash options now because investors will use those s p 500 cash options to hedge their positions in a market where they're concerned about movement to the downside that increases demand for those options it increases the implied volatility for those options so because we got the vix that measures that implied volatility if we see that vix moving up that means implied volatility is moving up on those options which means investors are increasing demand for those which means that investors are looking for those as a hedge which which correlates to fear with regards to the overall market but we can bring up the vix here let's go ahead and see what's going on with regards to the vix we'll bring this one up and you can see that the vix is the mix has been moving down as the market has been moving up but you can see today here we are starting to get a potential little bit of a bounce here so overall we've primarily been bullish because the market's been moving down so a decrease in demand for those options we are getting a little green candle here which could mean perhaps the vix could be moving in a bullish which could mean the market could be moving in a bearish way this isn't i would say looking at this candle it's not as impressive as some of these big candles right here i'm not seeing like this huge jump with regards to investor fear that we're seeing here but possibly the start of something here could it be something like this or maybe a one one or two day pull down on the market and the market continues to go up and the vix continues to go down here it'll be interesting to see going forward here but looking at this then with regards to what we go we have going on here let's come over here and look at spx again just to kind of look at this so when when we're looking at a breakout situation where something is broken above resistance level that in and of itself is bullish but is that occurring with regards to an overall uptrend are we just breaking out of a downtrend it looks like what we're seeing right now is we're just breaking out of the downtrend does that mean does that mean it's time to go to go all on bullish this picture point in time i would say there's a fair number of investors who look at that as possibly their posture changing maybe from a bearish posture possibly a neutral bullish posture because we have broken out of the resistance level but until we pull back and actually come off of a higher low not technically technically in an uptrend until that particular point in time so we can see here that here's a high right here we came up here we click came up here it doesn't matter where this terminates and heads down we're going to have a higher high up here right but we don't have a change in trend until it does turn down and we get a bounce off of a higher low now the longer this the longer this move continues up here before we get a a move to the downside the less likely it is it's going to be that we're going to revisit this low right here so it becomes more likely we're going to have a change in trend i'd say the move we have up here is is is impressive at this point what some investors will look for though is they'll look at the breakout point right here that's an old resistance level they will look at that as now a theoretical support level and if they're looking at things maybe from more of a neutral bullish standpoint if they choose that as their posture they may be looking at possibly doing a a short put vertical as long as they can set up their short strike prices at or below this theoretical support level right here so with that in mind let's go ahead and pull up our watch list here i'm going to right click over here and bring up her watch list many of you are just looking over the chat window do you want to welcome buddy here looks like we got sand dip and it looks like we got lamar and phil and bill and vijay and jack and everybody else louis walter osborne um kafka i believe liz and radio wayne and frank and marcy and gary and paul welcome to everybody great great to have everybody here i also see a few new names over there so many of you are familiar with our watch list right here um i call it i call it one dollar wide liquid i'm frequently asked hey ken can we share the watches i'm not able to do that but just a little bit of a heads up these sessions are archived and when they're archived on youtube if you go into the if you go into the recording on youtube and you go into the description and you click on on more or or or show additional where you have the description for youtube video that will open up there will be a link in there to the session where we talked about how to build this watch so i can't show the watch this with you i definitely can take you through the process of how to build it and there's a link on that session as far as how to build it in the description of the youtube video okay but what basically we have this watches and basically what this watch is is built to do it's built to find stocks that tend to have good liquidity from a slippage standpoint meaning meaning this meaning the distance between the bid and the ask prices are are comfortably narrow having said that though we do want to keep in mind that under different market conditions that slippage will widen out and it will contract so when the watch is put together they are acceptable but under again under certain conditions we may pull something up and they're very wide i think wait wait that's not acceptable well typically it tends to be acceptable but sometimes they will widen out so we want to keep that in mind looking at these and we'll basically done what we've done what we've done in the past meaning that we're taking a column right here and we're bringing we're pulling up a customized column called implied volatility by the way it is not a think script study or custom study like this this is a standard study that's available to you as part of thinkorswim platform this is giving us the implied volatility on individual securities and we're sorting it to bring up the highest levels of implied volatility up to the top and then we've intentionally passed over the top ten and the reason we've done that is just to be a little bit more conservative with regards to that volatility because these have high implied volatilities for a reason and the reason is that they that they're that the expectations with regards to price movement is great with regards to volatility both to the upside of the downside so would like to have the relative we'd like to have you know a certain level of implied volatility but not necessarily the highest the reason would like to have a a certain level of implied volatility as we're looking for something that's at the high end of the high end of the spectrum but unnecessarily the highest is because if an under if an underlying security has a relatively high level of implied volatility that means that there has been a a increase in demand for the options for that security which has pushed the premiums up and because on short verticals one of the primary drivers is the option that we're selling would like to sell something that from historical standpoint is more expensive now than perhaps it has been in the past well that's why we're looking for the higher levels of implied volatility without wanting to go too far overboard with regards to wrestling with extreme movements in price of course we know that regardless of level implied volatility that we choose the price can still be very volatile depending on unfolding events that possibly could occur coming out of these and i'm just going to for if we're skipping if we're skipping the first 10 i believe that would take us down to about this area here about down here to united airlines it looks like and what we want to look for here is is we want to is we want to look at some potential breakouts i'm not seeing anything there that just jumps out at me we got mos here this one has a breakout right you come right across there there's a nice breakout so on this breakout could we sell a short put verticals down here it's gone up there quite a ways sometimes investors if you're looking at a situation on a breakout like this it's actually advantageous if you not only have the breakout but following the breakout you have some weakness coming down and moving towards that support level that presents a situation where a little bit more likely to be able to sell your short foot vertical below that support level so we'll be looking for breakouts we'll also be looking for some weakness today similar to what we're seeing with regards to weakness on the s p 500 hopefully moving down towards the support level and increase the possibility that we could do a short put vertical below that support level so let's pull some more so these it looks like here we have some um some some some energy stocks energy is so volatile right now one of the things to keep in mind with regards to energy looks like here's marathon oil is it is that energy could have a dramatic change overnight if there was if there was if there was an announcement coming out with regards to a possible peace agreement or some of those things with regards with regards to worldwide events i don't know that will occur but it could occur so again in order to do order to kind of avoid some of the big volatility could happen we'll go ahead and sidestep energy today here as well just because of the volatile nature and how and how closely it is currently tied with regards to what's going on in the world right now okay so pass on mro we'll pass on dbn amd right here let's take a look at amd and see we got going on here so amd i'm not seeing a real breakout there rcl right here it does look like rcl's got to break out but it did occur a while ago if i come across right here that's a significant resistance level of 71. we are starting to move down so possibly rcl would be a possibility but probably one of the challenges you have with rcl though is just the overall trend it would be nice on a breakout if the trend was a little bit more positive in other words if the if the faster period moving average right here which is the 50 okay if that was greater than the 200 now because the overall market has been in a downtrend we may not be able to find something like that because we because what the overall market's been doing would be nice if we had a little bit more strength possibly registering here on these moving average lines and also possibly with regards to price movement okay but i'm going to go ahead and note this because this possibly is a candidate that will come back to let's take a look at a couple more i don't want to spend too much time looking for these because the main thing is here is to identify what types of things to look for not necessarily to find the best or anything like that okay so here so this this this one's a little bit more interesting in that the 50 period moving average right here it's moving down but it's starting to flatten out but it is currently above the 200 rather than below and we do have a breakout of a resistance level right here okay we break out everything we have a break out of the resistance we are moving down towards that resistance level now we don't know that that resistance level will hold up the support so that's one of the risks that we're going to be that we're going to be that we're going to be dealing with here let's go ahead and we'll use this for our example today just based on the discussion that we've had up to this point this is nvda and let's collapse our left hand side here so we sort of focus on the chart now and notice that we want to be with regards to our shortcut vertical we want to be below 244. okay so i'm going to pull up the trade page just just a little bit of a heads up here before we get into the nuts and bolts this investor so so so we've gone we've gone relatively quickly here kind of going through the technical analysis and talking about things and we're going to be looking at a shortcut vertical i do notice there are some new names over there in the chat window now if i say short but vertical and you say what in the world is that that's okay i'm going to explain this as we're going on but but but but but i will say this that when you when you attempt when you attend this particular session this session is considered to be to be a a intermediate session so it is assumed that you do have an understanding of what it means to buy an option what it means to sell an option if you don't have that understanding you're more than welcome to be here love love love to have you here i will try to craft my words so everything will be beneficial to you but a little bit overwhelmed i'd encourage you to maybe check out the um the online getting started with options online course i'll show you where that where that's at here in just a little while okay all right let's go ahead and do this so so basically with with regards to a short vertical just as a way of introducing with the shortcut vertical we come down here below support and we're going to sell the higher strike price and we're going to buy the lower strike price these are going to be put options what is what is a put option give give the give the owner the right to do the put option gives the right the right to sell the stock so if you own a put option it's giving you the right to sell the stock at the strike price so if we're selling this option has a higher strike price we're buying one has a lower strike price because this one is at a higher strike price that's going to be worth more than this one down here that has a lower strike price so the result of this because what we're selling is more expensive than what we're buying that results in a credit and what we're trying to do here is to capture most of or all of that credit and if you think about it this these give you the right to sell the stock if the stock during the period of time they're in this trade if the stock does not come down to these strike prices right here these options will most likely expire worthless they will most likely expire worthless and so we'll be able to capture our credit right here let's see we can do here then with regards to selling selling something down below this point right here to do that we're going to come up here to the trade page i'm going to collapse what we've got right here i'm going to delete that and here's nvidia and we've got some different expirations we've got 22 days we've got 30 days in here we generally gone in the neighborhood of about 23 to 30. 22. why don't we see if we catch something 22. the nice thing about being out 22 days i think would all agree it's a little bit easier to forecast price movement going out 22 days than it is 30 days you may say wait a minute ken it's also easier to do 16 days but when you get to 16 and nine of these ones we found out is the reward to risk ratio becomes becomes so inferior it becomes to be prohibitive particularly when you take into consideration transaction fees and there are transaction fees on these to be mindful of i'm going to open up the 22-day one right here and we're going to come over here on the put side and generally what we've tried to do in here we've tried to get to obtain a probability of success that is a 7 that is somewhere in the neighborhood of about of about 70 to 73 and what that means is this delta column right here well let me just let me just throw this out as a question to all of you in the chat i'm going to give you a little bit of a quiz here to put your thinking caps on if we want a probability of 70 to 73 percent in other words a probability of success of 70 to 73 percent then what deltas are we looking for here we're looking at these delta values what is what exactly are we looking for here with regards to an appropriate delta value okay any any any any thoughts on that at this picture point in time okay give give give that a little bit of a thought i'll go ahead and answer my own question because it does tend to be a little bit of a delay between the time i ask question the times the answers start flowing in over there i am just looking over here in the chat window and sandu scott is nvda bouncing off resistance let's just take a look at that while we're waiting for some things looks like we got some some answers flowing over here so lewis is saying 30 to 27.
is saying 27 30 so you guys are right on target vj's 30 or less juanita's 27 30 jane's 30 so you guys are all right on target so that is fantastic okay so why don't we start off with this 27 here this will give us a you know the probability on this is going to be basically the difference between this and one so if we take one minus 0.27 that's going to give us 73 so this has a 73 percent a 73 probability of success is twenty nine would have a seventy one the thirty two would have a sixty eight okay it looks like got a lot of a lot of a lot of great answers coming in over there so why don't we start here i'm gonna do a right click right here on the 240 i'm going to choose sale and we're going to go vertical right here and it looks like a credit here somewhere in the neighborhood of 65 to 55 now this when we're talking about a stock that's 258 we see the difference here between the mid the natural the dime that's actually not too bad for a fair number of investors sometimes you'll see something like 65 over here and actually a debit over here the if if the slippage is great we still have some we did still have some slippage right here but this this isn't too bad particularly for a stock that's priced up here let's we'll go ahead and try to get filled whatever the natural is that but let's say we have to settle down here for 50. we have to settle for 50 what's going to be our return on risk if we have to settle for 50 what's going to be our return on risk well on a short vertical our maximum gain is going to be the credit that's this guy right here if that ends up being 50 we'll try to do better okay but if it ends up being 50 then 50 is going to be our maximum gain what is our maximum loss and so we can gauge our reward to risk we take the distance between the strike prices right here there's difference between the 240 and the 237.50 remember we're selling the higher we're buying a lower that's 250 so if i take 250 which is the distance between the strike prices i subtract from that 50 my maximum loss here is is 200 so to get my return on risk then i take my 50 here and i divide that by my maximum loss of 200 that gives me a 25 return and in here what we've typically done is we've played the part of the investor that wants to get at least one percent for each day that they are in the trade this is a 25 return on risk before transaction fees we're not including transaction fees and notice for each one of these there's one two transaction fees going in and possibly one two transaction fees exiting as well okay but but for purposes of our discussion here we we we don't include that in our analysis here but i would encourage you to include it in in in your own individual analysis when you're looking at these things but that but but this this this would meet the parameter that we're using here we want to get at least one percent crusader in the trade because we're looking being in this trade for 22 days okay so we just want to let now there's there there's one other aspect of this that we want to look at in looking at our metrics and we we actually had a separate session with regards to some of the key metrics that we want to look at let's just pull them up here on the scratch pad so let me just put in the symbol here there's our symbol and we want to look at we want to look at our return on risk okay and we want to look at our probability okay that we want to look at our mode and we have a different kind of a definition for mode in here by the way both mode is using a lot of different ways to invest and we're looking at our moat as a percentage of the atr so let's go ahead and look at these metrics in relationship to this trade okay so our symbol then is nvda our return on risk before transaction fees is 25 our probability of success is 73 whoops 73 is our probability of success and our remote as a percentage of atr let's look at that to do that we'll need to look at the chart so we want to look at here's our atr down here okay our short strike price on this what was our short strike price we need to get that our short strike price was 240 so we're currently trading at 257.93 so to get our mode you want to find the difference between where we're currently trading at and our short strike price that's going to be that's going to be the distance we want in order to tie that distance so in a meaningful way we want to make that as a percentage of the average true range and this is just a standard average true range study you can pull up on the thinkorswim platform there's nothing custom about it but the average true range is telling you investors is basically giving you it's giving you the average range that the stock tends to trade in from the highs to the lows on a day-by-day basis going back 14 trading days and the way the math is done it also takes into consideration gaps so it's a nice measurement of the volatility of the underlying security so let's put in the current price in right here which is 258.17 i'm going to subtract from that our short strike price which is 240.
so the distance is 1817 our average true range right here it's a little bit hard to see because this this color isn't super dark when i come over here today the average true range is 13.88 divided by 13 so so we're looking at the at the moment is 130 percent of the average true range so another way to another way to look for that look at this if this stock went against you it could go it could it could go the maximum range you know from the highest to the lows for one day almost about 30 percent of the next day before we would hit our before we would hit our short strike price that would be another way that would be another way to take a look at that let's go ahead and put our percentage in right here though 130 percent of the atr investors this is something right here that you'd want to include in your trading journal you know and and if your trading journal is just is is is something that you hand write in a pad that's great you know as long as you have one that's fantastic but keep this in your trading journal because basically you can ask me is this a good moat you can ask me is this a good probability you can ask me is this a good return on risk and i couldn't give you the answer to that because i don't i i don't sit by your side and trade with you yeah and and because we also because we all see we also we also tend to see things a little bit differently what might be good for me could be may not be good for you and and and what is good for you may not be good for me so the answer to these to these questions right here those are going to be in your journal and so the sooner you get started with the journal and start keeping some records the better by the way i'll show you a journal a journal and unfortunately the journal that i'm going to show you will provide you with your return on risk it will not i don't believe would provide you with probability okay and it doesn't provide you with the mode here but it is a nice place to give you to give you um your your return on risk to keep track of those as a as well as some other as well some other valuable metrics as well these other ones though you can add to it you can't add this to the journal via notes okay and i'll show you i'll show you how to do that as well let's go ahead and come in here then and so our our maximum loss on this is roughly 200 that's before commissions we know that we may not get filled where we anticipate being filled when we access so theoretically the maximum loss could be greater than 200 so we want to keep that in mind as well let's play the part of the investor though that's okay risking a thousand dollars on this trade so if we if we if we're if our theoretical loss is about 500 you know it's going to depend on where we get filled when we first enter what our credit's going to be and also when we actually exit the trade where we could get filled in those circumstances but let's just say roughly two hundred dollars if we if we're okay risking a thousand bucks that would mean five contracts right five times two hundred is a thousand dollars so we'll come over here and i'm gonna go one two three four five so there we are right here okay i'm going to go ahead and choose first trigger sequence i'm going to create an opposite order great opposite order this is an exit order i'm just going to set this up so it gets us out at 85 percent of our max gain if the opportunity presents itself and we're not there to capture that opportunity so this second order is an exit order how does it have a good till counts i'm going to leave it as a limit but i'm going to set it at 85 percent i'm going to set it at 15 percent of 50 cents which we which would be eight which would mean we would capture 85 percent of a 50 cent credit now if we get phil to 62 then that's then then that's going to make things even better but again to be conservative we'll assume that we have to come down to 50 in order to get this filled so where would we set that limit order then in order to capture 85 percent of the 50 cent credit would take our 50 cent credit right here multiply that by 0.15 which is 15 percent so anytime we can get out and get out of this at 7 cents or less that will give us 85 percent of that credit and if and if if we get out 85 percent of our credit rather relatively early in the trade we're going to play the party investor that would be happy with that it's going to change this limit order then down here 0.07
and let's go ahead looks like we're in good shape here let's see if we can get filled here i've got this open here we'll go ahead and try to get filled at 60 here this kind of bounce between 60 and 65. let's pop it in here and say send under short verticals rejected acceptable i wasn't planning on seeing that one that was a weird one let's come back in here and take a peek folks um well you know now it got filled so who knows some sometimes on the paper trading account you can have some odd things happen i'm not sure why that rejected thing came up there to be honest with you but is it in here looks like it is here we have our five contracts and where did we get phil i think i'm just curious where we got filled we'll come over here nvidia so it looks like we actually got filled here at 65. now the reason now i'm i'm going to go ahead i'm going to go ahead and take i'm going to go ahead take the 65 we use that when we book the trade because i've seen situations where the paper trading account can be more can be more fussy than a live trading account or the paper trading account can be more forgiving than the paper it could be more more forgiving than a live trading cat so i'm just i i think we're okay because distance between the bid and the ass was tightened up i think we're going to be okay using the 65 realizing of course in a live trading account we may not get the 65 we may have to settle for 50 and so on and so forth okay so we have our trade here let's put this into our trading journal and to do that let's come over here and bring this trading journal up i just want to make a couple of notes here so we are our symbols nvda were 2.5 wide we got a credit of 65 and we did five contracts so here is our trading journal i believe let's see there it is right there okay so we're going to go ahead and enter it here by the way investors let me do this let me send a link to you over in the chat window i think i can do this relatively quickly to the trading journal and also show you where to find it as well those of you that may be catching this as an archive recording just a little link that will okay so over there in the chat window is linked to the trading journal just just a reminder the training journal is not guaranteed with regards to accuracy or time i'm also actually not recommending its use i would recommend the use of a trading journal but not necessarily this trading journal if you pulled up you feel like it's beneficial grade if not then of course that that is okay as well let's go ahead and put this let's go ahead and enter this trade and just kind of go through the exercise here so you start off here with this so by the way when you pull this trading journal if you're wondering what to put in in all these columns just click on the column heading and you'll get a little note that tells you see a little text note here that tells you what what to put in on each one of those calls it also tells you what is included in the columns as far as what's currently being shown we just have questions on here just again click on the column columns columns to get the information line let's start off here though i'm going to put in nbda as our symbol and the width on this was two dollars two dollars and fifty cents our credit was .65 the number of verticals we did was five and the transaction costs that we're using here in our trading journal is 65 that's one of the nice things about our trading job is to go ahead and include the transaction account so that does it i have it in here so i'll go ahead and save it while we're over here let's just do a little bit of a review of where we're at so investors we've done we've completed 99 trades we've been successful in 83 on on about 83 percent of those trades we've been unsuccessful on about 16 17 percent of those trades our average return on risk and by the way this does include all of our losing trades our average return on risk is 24 our average time in the trades is about 13.33
when i bring this up i frequently get questions wait a minute we're going out 25 to 30 well we do a fair number of earnings trades and on those earnings trades we're in those trades usually so in the neighborhood about two to three days one of the things i i would say that some investors would find impressive about this is our winning percentile the reason i'd say that that could be impressive to some investors is because again our theoretical probability of success is generally at 70 to 73 and when we enter an earnings trade the theoretical probability of success on that is usually less than that so we're currently outperforming the theoretical probability of success and we will attribute that to our technical analysis we're looking at support we're looking at resistance we're looking at modes and comparison average true range and all that i believe that that is part of this now are we going to continue to have the success ratio not necessarily we could have what's called a reversion reversion to the mean folks okay if we have a reversion to the mean then we'd see this 83 here probably drop down to 70 or possibly even lower so so we want to keep that in mind what's happened in the past also in a paper trading account isn't necessarily indicative what could occur in life trading don't forget these are not recommendations these are just examples only all right so i did want to come over here and show you where you can find that trading journal so this is just the td ameritrade website i send a link over there in the chat window for those of you that aren't here live okay on the on the td ameritrade website just come up here and roll rollover education come down here to webcasts and underneath webcast let this populate here clinking along there should be up here in a moment or two there we go are we just right there the webcast and come over here where you have instructor click on instructor come down here and choose ken rose and then depending on depending on when you do this short ver like today i'm teaching this so short verticals is the topic you may have to scroll down two or three in order to find short verticals when you find four verticals right here is your link to that trading journal you click on it right there and you can download it and it would be the same way now i'm not able to send you the trading journal that has all our 99 plus trades in it but you know those are those of you that have been here for some time probably have the lions here possibly all of those because we put them in here and so you could just start now and start adding those but also encourage them even more importantly than that is to use the concepts you're teaching here and go out and do your own trades find your own symbols and go through the process we've used as far as you know how to build a watch this identifying potential candidates we didn't find necessarily the best candidate today the reality is we don't know what the best candidate is right okay but but go out and and and possibly use some of the methodology we've used to find some of your own candidates and do some of your own traits and start booking those trades in a trading journal that would i would like that would be i would suggest extremely helpful to you already investors well how are we doing today let's go ahead and wrap things up here so let's come back over here so what do we want to do here today well we wanted to review our current our we wanted to review the current market to determine our posture i believe we did a good job of that we wanted to discuss breakout technical price patterns and things like entries and specifically this particular point things like entry entry is related to those and we wanted to demonstrate how to do a paper trade using the thinkorswim platform okay we've got a little second here before i go into the last disclosure i just want to come over and take one more link over here the chat window see if there may be something here that i can answer with the benefit of a chart oh oh oh i just did see something here from from a wreath yeah you know before we run through those let's come back over here for just a second because we want to take a look at our positions right i was kind of looking at the clock thing and how much time and which we had and the question here came in on here on xsp this was an iron condor that we did and it looks like we have nine days full expiration looks like we've had a pretty good day here today doesn't it we've had a nice move towards profitability we're currently trading at 446. this is an iron condor the market's primarily been moving to the upside right so the key thing here is this is 446 below our short call our short call right here is at 450. so we're currently below that 450 but i think the question is could we manage now or wait you know any any time any time price is correcting things for you we played the part of the investor that's okay letting price take its run we still have nine days here which is plenty of time maybe price comes down here which is moving in our favor then maybe we get a bounce at that time we may choose to do something possibly a change of polarity or something along those lines but right now price is moving for us let's go ahead and play the part of the investor that's okay letting price play out what's currently going on and then up here we have our our ibm was this is the trade we did last week this is just a this is actually a a bearish trade because if you remember investors last week we were more we were more various you know when we're looking at last week's session we're we're in that downtrending channel things have changed though okay which which could mean that we have 16 days left on here if the market stays bullish when we're in a bearish trade there's a good possibility we will need to make some adjustments here but so far so good we're currently sitting at 128 we need to stay below 131. this will be
one to watch as well because we do have we we got a neutral one down here okay this one's bullish these are these are a couple that we'll watch if if i come in here and i make an adjustment to these i'll try to do a little a little five minute video and post it at that time i'll try to do that just just a little bit of a heads up with regards to that that would be over here don't forget to click on the subscribe button i think i think it's right here click on the subscribe button by clicking on the subscribe button you're more then you put yourself in a better place to be to be updated on things if i go ahead and make an adjustment here then and do a little bit of five minutes do a little five minute video on there then you'll then that would put you in a better place to be aware of that okay when when when that possibly occurs all right but we'll see we'll we'll see how things play out here okay well with that appreciate the reminder on that uh marie i'm glad we will go and take care of that all right again hey love to see you over there on twitter at krosc underscore tda and again thanks to big thanks to john mcnichol for being over there in the chat window and again john post a lot of great things over there on twitter particularly if you're interested in in various different kinds of delicatessen type foods i don't know if i call them delicatessen i would say they i would say they look very good and also a lot of stuff with regards to well jaundice john just does a lot of great things i i encourage all of you to follow john and allow the stuff that he does all right everybody so just a reminder that our content is intended for educational informational purposes only it's not investment advice or recommendation of any security strategy or account type so be mindful of that and with that we'll go ahead and wrap things up everybody i hope you have a great afternoon and evening best of success investing also um just a little reminder i'm sure you've seen don't notice on this in some other areas we do have our investor education day tomorrow i'll love to see you there as well i'll be manning the chat the i'll be manning the chat window there so if you want if you want to hit me up for some questions over there i should be in in a lot of those sessions over there in the chat window so all right everybody this is the best of success you're investing again i hope you have a great week and hope to see you here again next time we'll see you later thank you you
2022-03-27 15:28
