Swing Trading (days to weeks) | Mike Follett | 9-17-19
You. There. We go hello there and good morning ladies and gentlemen, my, name is Mike Follette filling in for the one and only John McNichol he is still, out, of the office, serving. Our country, and anyhow, appreciate, him but, I'll be filling in for his, session today it's good to have you on board, this. Is swing trading and, just, to introduce the, topic, of the session, today what I wanted to focus on is. Breakout. Defining. Breakouts, that's, one of the two kind of primary entry, points, that a swing. Trader might use you, know that along with a bounce trade, and breakouts. Of noticed can be a difficult thing to define so what we'll do is talk about some ways that breakouts. Could be defined. Using volume, alright, hey if you wanted, to follow me on twitter you can hit me up at em Follet underscore, TDA and of course a really easy way to keep track of these sessions, when. They get recorded or if you want to be alerted to new live sessions, that are coming up you can like and subscribe, to the channel it's, just a great way to to. Stay, in touch and that's going to be to the trader tox channel by the way okay let me go ahead and hit some disclosures, as. We cover this information, remember that options, are not suitable for all investors that. Are special, risks inherent in trading options that may expose investors, to, potentially, rapid, and substantial. Losses spread. Straddles and other multi lake' strategies, can entail substantial. Transaction. Costs including multiple commissions which, could impact return. Also. There's, additional complexity. When you've got multi leg option strategies, trades. With minimum profit benefit, can be more significantly. Impacted. By those Commission's, so be aware that impact, in order, to demonstrate the, functionality of, the platform, we need to use actual symbols, but any investment, decision you use or that, you make in your self-directed account, is solely your responsibility. Transaction. Costs are important, factors and remember, to consider those when you're evaluating any trade and there's, an, example of how those transaction. Costs might appear, paper. Money is for educational, purposes. But it's not guaranteed a. Profitable. Outcome if you're successful in paper-money, market, conditions do change so it could be different results on your live past. Performance, does not guarantee future, results or success all investing, involves risk including the risk of loss and while. This class, does discuss, technical analysis, just be aware there are other approaches, including fundamental, analysis, stop, louder stop loss orders are not guaranteed, and you. Know they actually become, market orders unless they're, a special, type of stop, orders called the stop limit so, just be aware of those risks, probability. Analysis such, as probability. Of an option being in the money that's, theoretical. In nature and it's not guaranteed back, testing, is taking a look at historical, data and, results. There, are gonna be hypothetical, and the future does not always, repeat the past no, soliciting, no recording, no taking pictures no, part of this presentation, should be rebroadcast, without. The written consent of TD Ameritrade, there's, a quick look at the Greeks from Delta all the way down to theta and remember. Those are just definitions of how you. Know options, prices. Might change with price time and implied, volatility.
So. Thank you for joining, me again let's jump over to our. Paper. Money account so that's what you should be seeing on your screen right now and. Over here on the left-hand side of the page if we look in the scratchpad, I just, wanted to kind of keep the sessions simple, just, simplify, and focus on really one. Important. Topic and hopefully, this will make you or give you a better understanding of, how this. Might be applied but. We want to talk about using volume, to, define, breakouts, I don't know if you've ever run into this problem yourself bit, when. You're in a situation where, maybe a stock has had a move higher already. And you're. Thinking I'm too late I'm too late I'm too late we're right up next next, a level of potential resistance, and then. The stock is able to break through resistance. You. Know you get some sort of a breakout do, you ever feel that. Hesitation. Right, with that breakout, man it's already up so far so fast, is there, a chance that it's gonna keep going higher, or, is it more likely to have some sort of a pullback and come back down again well. There's always a chance that could pull, back there's always a chance it could go higher but. The real question is do you have you know it's some guidelines, in place that, tell you and are you comfortable with these guidelines do, you believe in them that breakouts. Are legitimate. Entry, points, and if you have a breakout. You, know can you define what that breakout is so that you can have confidence and taking that trade now, as I talk about how volume, might, be used to verify or confirm breakouts, just. Remember, this is for illustrative. Purposes only, right. A breakout. Can absolutely. Fail even though what. I share with you might be in place, to. Confirm the breakout and so. Let's let's talk about how volume, might. Help a trader confirm. Those breakouts, ok, confirm that this is a breakout, rather than a fake-out, although anytime, breakouts. Can certainly fail. Even. If they have volume, but let me let me bring up an example here, and this, is one. This. Is one that's coming from yesterday. Just with all the news. And the energy, complex, we, had a whole, lot of stocks you know energy companies, refiners. That, have already made a bit of a run higher got, up to a level of resistance and then, we get this big move through. Resistance. In some of these names I do too the news about, the, infrastructure, damage over there in Saudi Arabia and, Holly. Frontier, HFC, not, a recommendation here this is just for illustrative, purposes only, this. Could be one, of those stocks right this is a refining, company, and. If you notice yesterday, they, had a really big price move higher and that price. Move higher from yesterday, you, know depending upon the, way the trader is looking at this whether, they use the closing. Prices to. Define resistance. Or the high prices to define resistance, but, some traders might look at that and say well based, on closing, values. This. Thing broke a level, of potential. Resistance yesterday. Okay, now again, some, traders might define, resistance as the. Intraday. High so, for example if we go back right. Here, a trader, might say well that's. Actually. Resistance. And. That's fine if, someone, did take. This point of view that, may be using those intraday, highs maybe that's the level of resistance, but, I would say this, in many swing traders kind of take this approach if. You've if you've learned over time that the intraday, highs are. Going to be more important, than the closing highs then you go at those but, in your mind if the closing, prices, are. More important than the intraday, prices, then you go with those and in this particular example for, this class will. Use these closing, prices here right so it looks like yesterday. We, closed, above. Some. Resistance, that, has taken place kind, of a maybe. A mini cup with the handle type a pattern there but, yesterday a close above resistance, now with, that close above, resistance.
If, That's being defined by the closing, prices right. Notice. The stock has already, had a pretty, big move higher right. A trader, at this point might be thinking well there's, no more reward, left there's all risk because. The stock has already had a pretty big move or a very large move all the way up to this point well. The logic, and you know what some, traders they just. Don't like the idea of trading breakouts, ever because, in their mind the, reward, to risk will, just never make sense ok, but the thigh here is if someone, decided, to get into the trade right and they were a swing trader swing, traders absolutely, love the idea of buying at support, and then selling, at resistance. To, give themselves kind of an optimal, reward risk ratio, well, the thought is if this is a breakout, above resistance. That. That old resistance. Would become new what, new. Support. And so, therefore they're, back into a swing trade again because. What was a ceiling, now, just became a floor, so, they're actually you, know in that in that mindset, they're, actually buying closer, to the floor anyway, I hope that makes some sense to you right swing, trading 101. Is. Buy, the lows and, sell the highs right, by near floors cell near ceilings, support, and resistance, levels when, you're talking about a breakout, trade for a swing trader you're, actually, buying once, you break through the ceiling right, if you can confirm that that is actually a break through the ceiling the. Thought is if you, can confirm, right, using, some set of guidelines these. Could absolutely fail by the way that. That old ceiling. Is now going to become a new floor right. Well then even, though you just broke through the ceiling you're actually still fairly close to the floor right you just use that old ceiling as support. So hopefully that kind of makes sense but now here's. The big question and this is kind of the, focus that. I wanted to take today is how, do you define whether. Or not that, is actually, a breakout, from yesterday, right this candlestick, right, here how, do you actually define whether or not that's a breakout and different, traders will have different points of view on this by the way there's not just one oh you, got to have absolutely, use this approach it's the only way to do it that's nonsense right, there's, a thousand.
Ways That, somebody could build an investing, plan and one, of the key points is that you find your, way, right that's what's important, that's why you're in a class like this as you study and you, find what works for you and something, that you feel like you can apply. Over and over again with, some level of consistency, all, right but now two. Things need to be in mind number, one, you. Know based, on a price, basis. Is it, bura is there a breakout based on price now. Certainly. This can be a difficult one we've already addressed this are, you going to use the intraday, highs or, the closing highs, right. So to, identify resistance. We're looking at ceilings, right ceilings. Defined, by intraday. Peaks, or closing. Price peaks you just got to choose one right. Which one's the right one there's really no answer to that it's, which one seems to be most effective, for your personality, and your mindset and I know that that's a weird answer but, that's kind of the way it goes okay, just be aware if you're going with the intraday, levels, kind, of the tops of these shadows, you, got to wait longer. Get in so, it's, kind of like giving up more theoretical. Reward. In the trade for better confirmation, okay, just the longer you wait for. Confirmation the, more theoretical. Reward, that you're giving up to get that confirmation, so, in this class where we're going to focus on is closing, prices looking. For a close to. Close outside, of the, closing, levels, of resistance, okay, now, that's one number two do. You verify that it's actually a breakout, with some, indication. Based. On you, know potentially. Either an indicator, or. This. Is one thing that some traders will use and this is where I'm going with this today maybe, volume, let's talk about volume for just one second, so. Volume is basically, just the trading, activity that's. Taken. Place on any given day pretty obvious thing here right, the. It's just the number of trades that went off in that particular trading day now, in the world of investing. Right what makes up that volume are all different types of investors, you've, got smaller. Retail, investors, you've, got big you. Know institutional. Sized investors, as well if. You think about that, volume right who is it that really generates. Most, of that volume, you. Know it's the big, institutional. Investors, you know if you take everybody's. Money Welland I shouldn't go. Necessarily. That level I want to say if you took everybody, who's listening to this webcast and pulled all of our money together, we're probably even collectively. A pretty small fish compared. To maybe the trading account of JP Morgan right, in one of their mutual. Funds, or their ETFs, or something like this right. So relatively, speaking the, retail investor, when they start trading they're just not necessarily, moving around enough. Capital, to make a huge, dent in terms. Of the volume especially when you're talking about a very liquid. Or actively trading stock traded. Stock it's. The it's the big institutional. Investors, that have a tendency to create the. Big volume. Now what do I mean by big volume it's, the volume spikes, right. And again. The more liquid, the stock is the more value, there is to this type, of analysis right, because that's when you, can have maybe. A better idea that, big volume is, is likely gonna be those institutions. But these big volume, spikes right, the ones that really stand out and one way that I think of this fun looking at these volume.
Bars Down, here at the bottom of the page this almost looks like the, skyline, in New, York City where. You've got these, buildings. That stand out so to speak these volume, bars that stand out above the rest. You, know those tall skyscrapers. So to speak and those, are the big you know those are theoretically. The institutions. You. Know trading, on days, like that and oftentimes that's accompanied by big, news right but that's, when the the big traders are generally. Doing a lot of their trading activity, so. Here's. The thought if you're. Looking, for a breakout, writer you're trying to confirm a breakout, some. Traders will use high. Volume. One of these skyscrapers. Or smokestacks, sticking, out above the rest to. Confirm, that that was driven, by, institutions. Right that was an institutional. Day and if, price closes. Above the resistance, on high. Institutional. Volume theoretically. Well, then some traders will use that as confirmation, pretty. Simple idea right just using, the. Institute, you know the large, volume. As, a proxy, for, institutional. Investors, and saying well if they're getting in well, then that could confirm that potentially. This, you. Know this could be a buy an entry point again, this could completely fail but, that's the logic here that's the mindset now, how do you define you, know you could simply, look at these smokestacks and, these skyscrapers down, here. Excuse. Me but, how do you define what big volume, is right how do you you know if you're especially if you're more of a quant and you. You want to have you know absolute, rules in place to determine when the volume is high rather, than you know that discretionary. Idea there what. Some traders will use is 50%, above. The average, so, whatever the average volume, is here, if the current volume is that plus 50% so, like a hundred, fifty percent of the average, some. Traders will use that as a, confirmation. The, big volume is there we're breaking out theoretically. That means institutions.
Are. Kind of getting involved as well and institutions. If they're getting involved, they usually have the, thought is that they've got so much money that's just a starting point a, better. Chance that later on they're going to continue to buy in because likely, they're only investing, a portion, of their investment. But. All those things coming together now. To, to, make life easier, though what. You might want to do is rather than trying to eyeball this, and figure, out where your average volume, is down there some, traders will actually put on an indicator, that, will help them identify where. That average volume, is and they might use maybe some sort of an average line, so a moving, average, on that, volume down, there and, you. Know let me go ahead. Excuse. Me here. Whoo. I, don't. Know what just happened. Okay. Let. Me go to the top of the page, and. At the top of this page we can actually input, or edit, some. Of these indicators. That are on our screen here and so, let me go to the. It's. Actually that beaker icon at the top of the page and that's where you can update or, add your existing. Technical indicators, and so with that beaker icon this is what we're gonna do in. The available, studies we're, going to look for volume and. There. Should be one in here that's already set, up of course you could actually update your existing volume if you wanted to but, there should be a study that's pre-built here called volume average so, I'm just gonna double click on that. If. I can, double, click on that just. Work, please. All. Right let's give it another shot. Because for some reason that didn't work and if it doesn't work we'll just have to. Potentially. Go. Another route here. Try. This again. Volume. Average. And. Guess, what, let's, try it that way okay the right click it looks like and you know what I was hitting apply after. A double click I probably just said should have hit add selected right. Here first but, you can right click on that and then, hit. Add. Selected that. Way as well just, for some reason the double click didn't want to apply, that okay, but anyhow now you got my volume average on there now before I go, any further with this though this, volume, average is gonna be based on 50. Volume. Bars okay, if you notice there in parentheses, gonna be 50 volume bars someone. Wanted to they could actually make an update, there I'm just gonna leave this in place, right but what's, the average what's, the time frame that you're averaging, here we'll, just go with 50 volume. Bars you, know if someone goes really short term maybe that's not enough confirmation. Maybe, to long term maybe. They just don't get enough signals, to. Validate, the trade or to give them enough opportunity, so, I'm just gonna go with 50, that's. That's, a widely-used, average. Number there but anyhow that's gonna be applied, now to my, screen let, me get rid of my implied. Volatility. Value. There hit OK just to clean up the bottom of the page and, now here at the bottom of the page on. Top. Of our, volume. And one, more thing I'm gonna get rid of the existing, volume that just kind of redundant, there so, let me get rid of that volume subgraph. I'ma, lay it okay but. If you notice down here at the bottom of the page now we, actually have a volume, line. Or a volume box, there and there's. A line. That's going through those volume bars that purple, line is going. To be that moving, average, and if you can't see that I'm just getting a little bit paranoid that you can't really see that very. Well let. Me update the, width here just so that hopefully has a better appearance on the screen. Apply. Okay okay but it's going to be that purple one right there that's, going to be the, fridge volume, based on the previous, 50, volume. Bars and what, somebody could do here to, determine, whether or not their volume, is high or low is just, kind of take a look at so yesterday we had potentially. That breakout, price action just. Put your pointer right on top of that volume bar and, yesterday's. Volume, was three, million four, hundred eighty, four thousand, and just so that you know what I am looking, at to determine that. Looking. At these numbers over, here okay. They're kind of color-coded. So. If I'm pointing, my putting. My pointer on a green bar I should, see a volume in green there and if. I look, in at the purple, I can compare, the. Volume, in the purple which is the average to. The volume that's either appearing, in red or green, over here that was the volume on that day does that make some sense there, hopefully.
It Does but I'm gonna put my pointer right on top of this day again and so. The average volume. Is. On. That day it was to, two, million. Eighteen, thousand, the. Volume, on that day, was. Three million four. Hundred eighty, four thousand, so. Now if somebody were using, the idea of breakout, volume being like a hundred, fifty, percent, of that volume average, okay, what they could do is just okay. Well what's fifty percent above. Two, million two millions the average, right. What's fifty percent above two million or, 50 percent of two, million is going to be 1 million right just take the 2 million divide it but you know cut it in half and then add that to your average right, so 2 million, plus 1 million that's 3 million that, would be 150. Percent of your average volume, so yesterday, coming. In at three million four, hundred eighty four thousand. That, was greater than a, hundred, fifty percent of the average does that make sense, hopefully, it does okay, so all we're doing is comparing. The volume, on that day okay, and you're gonna see that in the green if I'm pointing to yesterday's, price action three. Million four hundred eighty four thousand, two the average, and we, want to see that, 150%. Of, the average so basically 50% higher, than the average I know that's a little bit confusing and, the way to figure that out is just take a look at the average the one in purple divide. That by two I'm rounding, right but two million divided by two that's, going to give us 1 million and add. 1. Million, to that right, 1, million to the average and that's, where we need to be we, need to be at least 3 million and yesterday. We're at three million, four hundred thousand. Just quickly and you'll get better at that but that's just a quick eye ball looks, like yesterday, based, on that little guideline there, was breakout volume there okay, so now let's say somebody we're going to use that indication. Right so this is just confirming, breakouts, which can be a very, difficult thing, to have any level, of confidence, in after the stocks already made a big move higher unit, trust it to keep going higher. Well. The logic would be old resistance, becoming new support, and one, way to verify, that you've broken through resistance, is looking. For the volume, spike, and in, this in, this class we're gonna use 50%, volume or. 150, percent of the average volume and so we've just got that indicator on the screen so, now that's one thing now if somebody were gonna do this they need to also figure out where they would have a stop loss right. If they're gonna get into this trade they, need to figure out where they're gonna get out knowing. That the stocks already moved up so far, where. Would the exit take place if somebody had to take a loss well. The logic would be take. The exit, and put. It below support. Now. Where, are the stop-loss for you're using stop losses and put, it below support, now here's the question where. Is support. Well. Support, is going to be the previous resistance, that, can be hard to figure out right old resistance, becomes new support what. Some traders will actually, do just to simplify, life and I would encourage you to practice this and take a look at other examples so, that you can determine what's best for you but, what some traders will do is they'll, just identify. The breakout, candle, knowing, that that was in theory the institutional. De, and they'll take their stop-loss, and go one to three percent below, that breakout candle, some. Traders might decide to look for maybe. Exactly. That price point where previous, resistance was or, maybe, even go down to maybe, below the last low but. A simple, way to do that if you're focusing, on a breakout, candlestick. Which, would have been yesterday's, candle, some, traders will just go one, two three percent below, yesterday's. Candlestick. Okay that breakout, candlestick, price bar so, let's just put on a little paper trade here shall we and let's. Just follow through with this logic so one. Hundred better than hundred fifty, percent of the average volume there and first. Thought is if if this were an entry, where would the exit. Be established, where would a stop-loss, go well, let's just go one percent, below yesterday's.
Low. Price so what was the low price yesterday it. Was fifteen ninety three I'm just putting my pointer right on top of that candlestick, and I'll reference, that on the vulgar on a scratch pad here so, yesterday's, low, was. Fifty. Point, nine three. So. Where would a potential. Stop-loss, go, well. Just what's one percent, of fifty ninety three and what. We could do just in case we need help, with our mathematics, here we, could do fifty, point. Nine, three on. A calculator. And times. That by point. Nine. Nine and. That would just theoretically, tell us where the stop-loss would go and that, would be fifty dollars and 42 cents, and I'm gonna double check that just to make sure I'm looking at the right low and I'm, looking my low price from, these price fields, at the top when, I put my pointer on top of that price bar the, low fifty. 93, from, yesterday, if we're, one percent below the low the stop-loss would be at fifty, forty-two. So. Let's say someone we're going to buy some chairs and let's say they wanted to buy a hundred chairs here right, let's. Just go ahead and create a trade, I'm. Gonna go ahead over, to these price. Right. Click on the ask and choose Dover to the trade page you. Could buy custom, with a stop, or, you could by custom, with an O Co, bracket, now, for now I'm going to use this o Co bracket, and the reason I'll use this bracket is because. It has to sell orders in there right, there's an entry, order and then, there's a couple of stop losses that somebody could place in here or excuse me a stop loss and a limit, order that somebody could place in here stop, being a risk, exit, hey if the trades going against me I'll get out but. The, limit being a target, or a reward, exit, may be at a higher price and the reason I wanted to choose this is because. This, will give us a reason to go back and take a look at potentially. A target, that somebody might have on that, stock but, first let's go ahead and update our, stop-loss. Okay so if the entry we're at 50 312. We'll. Go ahead and use our stop loss at fifty point, four two that's one percent below that, candlestick, low it's, a fifty point four two. Okay. So we've got our entry, and our stop and, I'll tell you what we'll just make these. GTC. On. Both of these but now there's still another space, that needs to be filled in on this bracket and that is where theoretically, a target, might go alright so where might a target, go well let's just jump back over to the chart and this, is where it can be a real daunting. Challenge, well, how would somebody establish, a target on something like this well. They could use, ranges. Right and that's typically, what a. Swing. Trader will do is they'll, try to identify, ranges. That the stock might trade in and then. Use. A target. For the high end of the range and there's a couple of ways that can be established, number, one let me go ahead and zoom out here. Let. Me change, my time frame here we'll go just a little bit longer term we'll go with a 1-year chart.
See. If you can find a level of potential, resistance, right. Because again support, and resistance. Those. Are very important, numbers for a swing, trader. You. Know the logic is by. Its support sell it resistance, so, where might a resistance, be I'm. Taken, a look at previous, highs, and. Previous. Lows so, old top. Points, for the stock and, see if those line up with previous, bottom points, and if I just look at kind, of in the past here, 58. Dollars 58. Dollars and it looks like I've got this line drawn at 25, cents but, that was previously, a low price for the stock over here. Okay. And it, was also previous, a high previously. A high price for the stock over here so it kind of looks like in this level of about 58, dollars, that's. Where we might have some, resistance, so, hey, look the price of the stock right now is about 52 dollars and, 97 cents from, here somebody could kind of analyze, the reward risk to see if it's worth their time they'd. Be looking at maybe. Five. Dollars, worth of upside, reward. Right. If the stock actually worked its way up toward 58, versus. The risk of the difference between 53. That entry. Price and somewhere. Down below where our stop losses which is basically at 50 dollars and 47, cents so, risking, basically, two dollars and 50 cents to, potentially. Have upside, at that target of 58 dollars but. Those are a couple of things that a swing, trader generally, looks for is number. One where do I get out if I'm wrong you, know place the stop-loss maybe, one to three percent below, support and where, do I get out if I'm right. Targeting. Some sort of a range a range being, established, by potentially. Previous, resistance points, if there. Is no resistance some, traders will measure the price pattern, here right, if there's a price pattern, or a distance, between high and low levels like this on a, breakout, what they'll do is take that measured, distance, in the previous, range and add, that, to. Their. Breakout, of resistance. There and expect, that that old range will. Become the new range for the stock up here does that make sense this, one makes life pretty easy because we do have some resistance up here at about 58 and so, what we'll do for illustrative, purposes is, just, set a target at. $58. We'll, go ahead and hit this fifty-eight spot, zero zero and we'll. Make that. GTC. As well, so good till cancel trades here so. Just, to kind, of review this type of an order and also, you know let me show you how to create that order again just in case you've never seen that before, to. Create that type of an order one, where you've got a target and a stop loss and. Also that goes along at the same time with your original entry, and kind of grouping those all together, just. Go to your trade screen, find. The ask price, of the company in question here, right, click on the ask and, choose, buy, but. Go down to custom, right there's a buy up here at the top but go to buy custom. And then in the next menu that appears choose. With. Osio. Bracket. Of course if you only wanted to have a stop you could place just with stop right, but I'm going to choose that osio bracket, that, gives us to. Sell. Orders, on top. Of the one by order right in the way this works the first triggers, order if, the first order, the one at the top that's the buy if that fills, that. Triggers, these two sell orders that, are Osio tied, to each other right if one, of these sell orders triggers, the, other sell, order will actually be cancelled, does that make sense all right but we'll put the lower, stop, which was fifty I forget, what was it fifty, forty. To. Fifty. Point, four two and then, we'll go with the target, of fifty. Eight. 58.00. The. Current price is 50, - 90 - it's moving around a little bit but, what we'll do is we'll make these all good. Tell cancel. Orders now, I guess one quick thought before we move on if. Someone were looking at this and they were deciding hey I, need, to size my position, a lot, of times you'll see traders, sizing, their positions, based on the difference, between the. Entry, price and their stop-loss, price so, in other words if they're getting in 50, to 90, to say. That were the entry. 52.9. -, they'd. Subtract. To where their stop-loss, is which, is fifty point. Four. Two. If we're going one percent below support and, that, would be basically two, dollars and fifty cents they would they might make.
The Assumption, that their maximum, risk would be two dollars and fifty cents per share and, then, let's say they felt like okay in my account I'm willing to risk a thousand, dollars they. Might do this take one thousand, whatever they're risking from their portfolio, and divide. That by the. Width of their stop-loss, so, one thousand, divided by two point. Five. Boom. That would be 400. Shares essentially, and the logic is if that stop-loss, holds, which there's no guarantee, it will stop. Losses do have risk right, stock to gap down over, that stop-loss, and, if. The stock filled it for example let's. Say the stop-loss triggered, and the, stock actually sold, that fifty dollars there. Would if if there were four hundred shares purchased here it would actually be a greater loss than just a thousand, dollars on. The trade so just be aware stop, losses are not perfect, but, it is one way for a trader to manage. Their risk and, help. Them determine their position size, but, if we were focusing. On risking maybe a thousand. Dollars here based, on this mathematics. Might, decide to do four hundred, shares. Right. But again that stop-loss, is not a guarantee, to. Actually, trigger. But. Let's go ahead and adjust our, numbers. Here so we'll, sell four hundred on both sides and if you wanted to just, hit this chain-link I don't know why I didn't hit that first that, chain link will tie all of those quantities together anyhow. Here we go we'll hit confirm and send and, we'll. Let that work okay, so now, we're in, four. Hundred shares of HFC, with a stop and a target, so let's go through just another quick example here, shall we. How. About one to the downside. And again I'm not making recommendations. Here these. Are just some stocks that were kind of in the news yesterday and they, had some pretty significant, volume, yesterday. You. Know they've already made, especially with, the. Apps that might be associated they've, already made some pretty darn, big moves either higher or lower but, one that pops up here is GM, General, Motors, right. If you take a look at this, GM. I'm. Going to draw some lines here. Potentially. Broke down through, a level. Of support. Yesterday. And it actually created, this gap support. Being well there's a, breakout. Right here, there was a bounce, right, here and there was a break down. Right, here and a break. Up right there all around this level of about thirty eight and a half dollars, okay, so we break down below, thirty eight and a half, right. And the stock actually got all the way down yesterday, the, low price got down to thirty six dollars and ninety seven cents but, if the trader were thinking okay that's a break through support, they, might be thinking the stock could go all the way down and test maybe. These previous. Lows down here okay and that could be potentially. A swing, trade for that individual, but, the big question is well can you trust that breakdown, that happened yesterday well. If they were using the volume to. Determine, whether or not that was a legitimate breakdown, they. Might look at the average, and measure. The, volume yesterday. Compared. To that average and look for a hundred fifty percent of the average okay, so the. Average volume, and. I'm just putting my pointer right on top of that price bar yesterday is. Seven, million, two hundred thousand. Okay so, what's half of seven million two, hundred thousand. We'll, just call it, will. Just call it thirty, I will, just call it three. And a half million okay, take, three and a half million and add, it to seven. Million all, right that's going to take us to bet basically, ten. Million ten and a half million right what. Was the volume yesterday. So, I'm just putting my measuring. The, red to. The to. The paint or assuming to the purple from yesterday, looking. For that red to be a hundred. Fifty percent of that so if you notice that red was like two hundred percent of the average right, it, was the average plus another, hundred percent right the average plus the average so, that certainly, met that criteria. Potentially. That could be break. Down, volume, there take. A look at maybe another example, H, es. Right. And again big part of the reason why I'm doing this of course H es is actually breaking. Down today, so, if a trader were following some of the guidelines that we talked about in today's session they might have been stopped out if they, got in yesterday but, nevertheless I still want to practice. Sort of this volume idea, the, volume yesterday, was. Six. Million eight, hundred or six million eight hundred thousand, the average, is three, million that's the one in purple down there in the lower left-hand corner right. If if we're looking for 150 percent, well. Three mil three million divided by two that'd, be about a 1.5, million so they'd be looking for about four and a half million and. Oops. I've. Got. One of these. Optical. Mouse mice, here and it, keeps bumping around anyhow, three.
Million So. They be looking for about one and a half million on top of that so they'd be looking for about four and a half million the, volume yesterday, was almost seven, so, certainly that was big breakout volume, yesterday, but, hey this would this, would have failed I'm glad we're looking at this example if, someone, got in yesterday, and they decided to place a stoploss one, percent below the low price yesterday well. Guess what they, would, be stopped out intraday, today now that's not good that's not bad but. Just to let you know intraday. Today they would be stopped out and that's the one that's, one of the frustrating, things about breakouts, okay, but breakouts, it's something that is happening, quite, a bit in markets, right now and what, I wanted. To share with you today is just one way to determine. How. To validate. A breakout, and there are other indicators, that could be used right but just this. Is one day one way that swing, traders might validate that because, the, volume, is based. On an institutional, mindset. Right. Big volume, down here at the bottom might. Indicate that large, traders. Mutual, funds hedge funds. Large, algorithm. Traders. That. Those are also participating. And it's not a guarantee, to work out right but the whole point is you're trying to prove, that there. Actually is a legitimate, break out that old resistance, is likely to become new support, and, so. There one for so therefore one way to determine that or quantify, that is the, look for volume, 50%. Higher than the, average just, a reminder if you wanted to bring in that average volume, on the 50-day you. Really need to do is go to the beaker, icon, at the top of your chart there click on the beaker and. Just. Over here in your studies box as you're searching for studies just. Go for volume and, then. Look for volume average, should. Be able to double click on that and bring it down to your screen, but, if you can't double click and make that work just left. Click once and either, hit add selected down, here or you can right click. Yep. Right there right click and hit add selected from. There but, it's just one, way to. Validate a break out some. People never trade breakouts they might decide you know what I'm just not a breakout trader because, I'd. See it happened. Far too often that they just retrace, and come back down maybe. Are more of a bounce entry, trader, nevertheless. You. Know there is an entire school of thought that you've. Got these breakouts, as. Potential, swing entries, the. Thought there is the old resistance, becomes, a new level, of support, all right so I keeping, it pretty simple today giving. You a couple, of examples to work on I would encourage you all to maybe do some back testing, on your own see, what you think of using the volume and this volume average and see what you think of using breakouts, in your own trading and then, practice it right put on maybe, this next week do two breakout, trades, and if, you can find to bounce trades, as well maybe. Look at to bounce trades and just kind of compare, the outcomes, of those two things just. To get the ball rolling now we teach other technical, analysis, classes, remember, we, do technically, speaking, every day in fact today. This will be at noon. Eastern, Time we've. Got Connie, Hill at. Trading stocks and options in, technically, speaking and that's a good way to get more practice, on, this technical, analysis, right but, hopefully, you have a better understanding now on, that how that volume works and I'm gonna go ahead and wrap up the session coming, up next, for those of you who are just getting started with futures. We. Have a series. Of education. That we're putting on right now getting. Started with futures. Kind. Of a series, just kind of taking people step-by-step, how the futures, market, works, today's. Class, is going to be all about understanding, some of the mark. The market, and margin. Basics, and leverage. Ideas, of how futures, work so if you're just getting started with futures, you might want to join in for that class and by. The way that class is going to start at.
9. 9, o'clock Eastern. Tired, excuse. Me, yeah. What what time zone is it right now 9 I. Am. I getting my times correct. Here for some reason, anyhow. It. Will start it will start at the top of the hour we'll just put it that way I don't know what time zone you're in and. I guess I guess right now it's, 8 man. I just had a time warp there right now it's 8:14, Mountain time alright so that'll be 9 at 9 o'clock, actually, my, time zone. And. Convert. That to whatever time zone that you're that you're in there okay, thanks, everybody I appreciate, that I. Appreciate. Your attendance today and, maybe. We'll see you there in the in, the futures class that will start right at the top of the hour thanks, everybody and have a terrific day remember, those final, disclosures. And. Just. There's, a quick look at the Greeks and also, this is just a reminder of, how. There. Is risk in the market and also a look at those Commission's thank you very much.
2019-09-21 08:38
