Swing Setups and Technical Divergences | Swing Trading (days to weeks)

Swing Setups and Technical Divergences | Swing Trading (days to weeks)

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good day everyone john mcnichol here and welcome to swing trading days to weeks so one thing that's remained constant in this market has been volatility as prices have been swinging up and down more recently down but is there some support possibly setting in over the near term we'll go ahead and we'll take a look stick around [Music] all right hey it's great to see those of you that are live with us today such as sandy frank we got dave uh looks like is that uh alex there uh again mentioned dave there we have wayne's sandeep everyone else joining us and mr james boyd helping out on the chat today i do appreciate him being with us today he'll help answer any questions i am unable to get to uh he is a great instructor a good friend very passionate about seeing our clients learn about the markets and hopefully have their own successes there you can follow us both on twitter at j mcnichol underscore tda you'll see that at the bottom of the screen throughout the presentation james can be followed at j boyd at jboid underscore tda great way to learn more about your coaches markets oop that was a a bit of a foul there let's go ahead and go to the next screen here let's take care of disclosures and we'll get right into our discussion here today keep in mind this content is intended for educational information purposes only non-investment advice or a recommendation of any security strategy or account type options not suitable for all investors special risk inherent to options traded may expose investors of potentially rapid and substantial losses spread straddles other multi-leg option strategies often involve greater more complex risk than single leg option trades likewise uh keep in mind you're encouraging practice which you learn here today with tools such as paper money software however it is for educational purposes and successful virtual trading during one time period does not guarantee successful investment of actual funds during a later time period as market conditions change continuously a long call or put option places the entire cost of the option at risk likewise with short options they can be assigned at any time regardless of the in the money amount up until expiration and while this webcast may discuss technical analysis uh other approaches include fundamental analysis may assert very different views and a stop-loss order will not guarantee an execution at or near an activation price once activated they do compete with other income and market orders uh there you go there's a brief bio for those that are interested i do appreciate those here live as well as on the archive session i along with james i've been around the markets for quite a few years and also involved in the education aspects of it as well whether it's on stocks options future strategies on my twitter feed you can see my schedule likewise i know james posts his schedule as well on his pinned tweet there so it is certainly worth a look let's go ahead and take care of her agenda here and uh we certainly recognize that there's been some major moves in the market particularly to the downside a lot of volatility however it should not be a big surprise i know instructors such as myself and james have been talking about this for some time but we'll go ahead and we'll review some of the current market conditions today we'll explore fundamental elements of a swing trade we'll do an example of a bullish swing trade uh believe it or not as far as with a few examples that are given that constructive uh potential bullish swing setup we'll do it with a stock but then we'll go ahead and explore uh technical divergences with some of the indicators those you that may have been following me and some of our other webcasts we've started talking about that we'll explore that a little more on how those divergences may point or may support recent lows or looking for support areas that traders may look to trade off of and seeing is it that things are much more volatile and we've seen things swing back and forth in relatively wide ranges may be helpful as well to have more of a defined risk whether you're looking at doing a bullish or a bearish trade and we'll go ahead and we'll do that as we've done in the past by demonstrating on how to place a vertical spread which has a defined risk and a defined gain component there all right so without further ado let's get into it folks i will bring up the thinkorswim platform uh looking at the s p 500 on a daily chart we can see the price action forming more of a doji which is a small body and a wider tail that kind of points or towards some indecision when we do see that occur at a supporter resistance level that may be setting up for a level of support in this example since price is pulling down made some intraday lows and came off of that lows now we're still an hour left in the market so this is not a foregone conclusion on how this bar will form today but that is where we stand right now you'll notice as you look at some of the price action right around the 000 you know we'll say from a psychological standpoint the 4 000 area uh up to the 4020 area that was a previous retracement of a longer term trend and if we go ahead and we take a look at the s p from a longer term basis this is actually going back to the lows and i've made this reference multiple times to the lows back in october of 2020 preceding the breakout of the market in a very uh strong upward move and as prices can go up strongly prices can certainly pull back uh strongly and we're seeing that materialize as we have a 50 retracement of that rally since october now some indices have dug a bit deeper there and you can also see what potential lower levels are if these prices fail to hold from a longer term bullish perspective you know being able to hold that 50 percent retracement and at least in a potentially an attempt by bulls to try and hold these levels now we're looking at a weekly chart uh it's only tuesday you know currently starting off the week from tuesday whether this is a turnaround we'll see if that continues into wednesday thursday and friday starting to form more of a hammer in formation on the weekly chart some catalysts keep in mind uh inflationary news coming out tomorrow with the cpi uh on wednesday consumer price index i believe thursday would be the ppi producer price index so we'll see continued more gauges as far as inflation as traders uh investors may speculate on whether we have a near term peak in inflation or not traders keep an eye on the bond market as well as we have seen some yields back off a little bit so a lot of things moving around here as we go into the mid to end of the week and we also have consumer sentiment i believe on friday there okay so that's what we got going on with the s p uh glancing at a few of the other indices such as the nasdaq and let's see if i can get that mouse going here looks like i have a freeze screen here all right that's uh let's see if we can get this going here all right looks like i have a frozen screen here at the moment folks let me see if i can actually interact with something else i may take me just a moment here and for some up here we go we got it back and just let's see we can go ahead and type in the symbol here trying to type in ndx so there's the nasdaq 100 now the nasdaq 100 did take out some lows uh over this last week as we kind of zoom in again kind of uh more of a hammer in formation foreman for today or some traders may call this more specifically a dragonfly doji uh it was kind of the wings and long tail holding the lows from yesterday and looking at it from a weekly standpoint uh as far as the nasdaq did dig dig a bit deeper compared to the uh s p i'm looking at a fibonacci retracement from the lows back in march of 2020 we're just above the 50 retracement of that rally nasdaq has almost retraced back to where it had broken out again back in october november time frame giving back a lot of those gains and kind of pushing into the consolidation range from uh march of 2021 would have liked to seen the nasdaq hold around that 13 000 area uh failed to do that and notice how it did tumble down closer to that next retracement area and let's go ahead and we'll look at the russell rut and as we look at the russell now the russell may look a little uh noisy here with some retracements from multiple time frames but the russell has basically pulled back about 50 percent uh of its longer term uh rally if i go back and let's bring this out a little bit more basically had two fibonacci areas from the breakout uh back in uh again october of 2020. i'm going to remove one of these previous ones here here's a longer term going back to the lows in 2020. basically about 50 percent there's a bit of a confluence with the lows on the russell going back to previous highs on the russell from back pre-covered 2020 so basically retracing back to those areas so you know as we looked at those different markets okay and we've seen the correction yes nasdaq and russell in bearish territory as it's been more of a pullback of 20 or more for a bear market correction defined as 10 or more uh you know is there room for some support well we looked at some of those price levels and saw how they went back to previous highs or some of these fibonacci retracement levels but can we also learn a little something about momentum and that's where some of these divergences uh come into play so i'm going to touch on this subject for the markets and we'll also look at some individual stocks uh in a moment with that but if we come here and look at some of the major indices such as spx we'll start off on a daily chart now as i look at a daily chart with spx i do have an example of a stochastic a slow stochastic with relatively smaller settings in there a 7 3 slow stochastic which kind of focuses on more of that shorter term now notice that this indicator has been down in the lower zone which points towards potentially being over sold keep in mind though that prices can remain oversold for an extended period of time and so we can notice how that price action has been keeping this indicator towards that lower end but one thing that's interesting is notice that over that same period prices were making lower lows so as we see those prices making lower lows let's see if i can use my secondary tools here as prices we're making lower lows notice how this oscillator is potentially making higher lows that's defined as a positive divergence traders may refer to that as a bullish divergence when we see that it occur at an area of potential support that may build the case for that downward momentum which is already slowed down to possibly start forming another base kind of similar to what we saw here before as we saw the price action go lower but notice oscillators here like the stochastic were forming some higher lows and thus creating a bit of a base which did translate into a short-term reversal now there's no guarantee that that will occur in this example but that's what we're seeing there now we also talked uh those that may have joined me last week in technically speaking breakdown reversal patterns our wednesday session which is at uh 12 p.m eastern time we talked about multiple time frames and basically what we're looking at here is a bit of an example with a daily chart and as i go back here and have a weekly chart on the other side here now i have another indicator on the weekly chart and this can also be applied to a daily chart as well any time frame we have a macd histogram and notice here from a longer term looking at these weekly charts notice the price action from a larger time frame had been making lower lows and over this period potentially making some higher lows now keyword potential notice the macd hasn't ticked up or formed a reversal but notice as we look at this weekly chart as i go ahead and try and back out of this again notice again potentially earlier in the week whether we're seeing a candle reversal setting up on the weak or not again drivers such as cpi ppi and the rest of the news for the week can be some catalyst for that not to mention some of the unknowns as far as how things are going in ukraine and and russia uh supply chain covered china these are all those unknowns which will drive into some determination on whether one is wishes to take a little more defined risk on some of these individual trades so we're seeing those divergences on the market whether it's the uh s p we can see a similar characteristic on the nasdaq knows price action lower lows potentially making higher lows on the macd and then notice the same thing on another oscillator such as the stochastic here all right let's go ahead and look at the russell rut again on the weekly charts potentially positive divergence prices making lower lows indicator making higher lows same thing on the stochastic now keep in mind the takeaway here is what it says and what it does not say divergences point towards a slowdown in momentum in this case a slowdown in the downward momentum as we've approached whether some previous lows or some previous breakout points in the market that slowdown may materialize and more of the base where traders may be keeping an eye open for bullish reversal patterns much like traders were looking for earlier in the year or if there was to be a breakdown may look for a breakdown below those lows below that support okay so with that in mind we'll table those divergences there for a moment and we'll look at some individual stocks uh in a bit uh looking at the chat see if we have any questions uh kevin says let's make sure we're on track here we're not missing anyone i think we have a little bit of spam coming through there uh i don't know if we can uh eject uh that uh person there uh james if you can help me out with that appreciate it uh let's see getting through some of that uh kevin says uh ndx says dragonfly doji does it indicate a reversal of trent so hopefully i already answered that question a potential bullish candle may indicate support being hold now does that necessarily translate into a reversal of the overall trend that would be determined by looking at price patterns forming whether they're triangles rectangles and more importantly looking for prices to get back above some of their trending characteristics here we have more of a downtrend on the weekly i have an example of a 20 week 26 week moving average uh over here on the daily chart we have a 50 day that's still falling there's a 200 day and if one was bullish would have to consider and keep in mind as far as where the prevailing trend is going and have an idea as far as having some targets to possibly exit a short-term trade you know in this case you know target in where prices broke down previous support acting as new resistance moving averages can act as resistance and they could potentially be target levels as well okay let's see what else we got going here i think that covers down most of those questions there so let's go ahead and go back and talk about kind of more of a a classic swing setup if i was asked a question you know is there anything in the market that generally has been going up uh you know over the last few weeks or or beyond go ahead and share in the chat some examples of stocks that may have been going up more recently compared to a lot of stocks in the market going down as we've shown closer to support there so i'll pause and keep an eye open for that and go over an example of a swing setup as you're looking to answer that two stocks was looking for an example one was oln which is in the chemical manufacturing uh they also manufacture ammunition as well and notice a stock that is actually more bullish characteristics compared to the rest of the market stocks above the 50-day moving average it's above the 200-day moving average so both from an intermediate and longer trend still positive if i go ahead and we take a look at the weekly chart notice the weekly chart pretty positive as well it's above a longer term average here in this case a 26 week average and looking down at the macd notice the momentum on the macd has been positive now i know james uh teaches about some of these patterns as well but this type of bowl formation kind of pushed up near those highs and kind of retracing back kind of the characteristics of a cup and handle formation which is considered to be more of a a bullish formation okay some of you mentioned about other areas of the market such as in the staples uh you know campbell soup you know as a stock that is still in an uptrend and making some positive swings to the upside uh energy stocks another one uh another example have here is a psx which i believe is uh phillips if i got that right let's go to the analyze tab yep phillips 66 and as you look you know these are examples of kind of what would consider to be a classic swing setup some traders may refer to it more of a bull flag when we see a strong swing up in price action with prices pulling back over a couple of days so surge higher pull back over a couple of days let's look at olin oln again and kind of the same principle here a swing up and then price is pulling back over the session of a few days now by comparison notice here as we look at the daily chart notice this pullback here is pretty much back to a previous high uh that signifies more of a stronger trend let's look at psx again by comparison and those p psx by a similar comparison you know pulling back to that previous high indicating that stronger trend now if i was go ahead and do an example of a bullish trade bullish swing trade what we can consider is looking at the previous move in the price action one way of doing that i'm going to maximize this cell here we'll take under the drawing tool and then go ahead from a swing low to a swing high now those of you that may be very new to swing trading or struggle trying to identify highs and lows in the trend one tool that i've utilized in this class is coming up to the pattern tools on the thinkorswim platform under that there's it says show patterns i can click on that and then there's a selection here for select patterns now if i go and click on it i've already added this indicator it's actually part of the candlestick tab when you go to add patterns and then look for williams fractal you can start typing it in williams fractal you can click on the question mark to learn more about it basically williams fractal attempts to identify candle reversals some of the things that we're illustrating with the market these would typically happen at swing highs and swing lows you can continue going forward into more details and go to the learning center to learn more you can just double click to add that we'll leave the default settings there which are fine and you go ahead and you click apply now notice and it's it's hidden a little bit but there's a fractal point and there's actually a fractal point at this high notice here it goes back and plots some of the previous highs and lows in the trend so you can get an idea if the price is making higher highs and higher lows or not now notice there's not a fractal point here that would not appear unless there's actually a close above the high the low day some type of candle reversal which is actually a trigger for this type of trade if i go ahead and mark the high there one of the triggers is potentially to enter if the price trades above the high the low day likewise is looking at previous moves in the stock now this was a very strong swing some traders may go back and look at previous swings to kind of average out an anticipated move other traders may also just go ahead and target previous highs in that swing in this case if we were to as an example enter in and 92 54 that previous high is about 96.76 that's about four dollars higher

than where we are right now okay uh if we wanted to go ahead and project a target utilizing some of those previous swings we can see here there's been some uh swings back and forth we're a little more conservative even though there's not a fractal point that's being shown notice here was a one-day pullback technically it did pull back a little bit it did not show a fractal because it didn't fully reverse if i want to go ahead and measure a line from that period to this period so there's an example of a swing i can go ahead and right click and take that line we'll duplicate that and then basically start from the potential low of this flag and that's a flag we have a pole rising and then we have a flag kind of drooping down and look at that that potential target would be just above this previous high if i go ahead and mark that so we can see two potential targets a previous high as well as a swing high now dave asked a question we've talked about examples on where we may enter the trade and exit based off of the target so we're constructing that on the chart right now it would also make sense you know where would we get out if the trade fails and hence possibly utilizing a stop loss so we'll take a look at that low uh for this day which is currently for today the low of that is 87.83 that's actually going to be shown right up here when you highlight the bar that'll give you that low in this case 87.83 if i go ahead and take a look over on a calculator we'll go over here on the thinkorswim platform under our gadgets we'll switch to gadgets there and bring up a calculator we'll go ahead and we'll take that price level 8783 87.83

and then we'll multiply that by 0.99 we'll set a stop one percent below that low day and that would be 86.95 now there's other ways of setting stops those you have joined me in previous sessions we've talked about other tools such as atr trailing stops other different types of methods this is a a reasonable starting point if you are learning about swing trading where we essentially would set a stop that would be a dollar amount or percentage below that previous swing low that way if the trade fails and breaks down the idea is that the price would be stopped out now keep in mind we place a stop order there's not a guarantee it'll be filled at 86.99 once it triggers at that price it'll compete with other income and market orders okay so with this setup here we have an example of where the potential enter a potential stop on the downside and then potential targets to the upside so what i can do here is i can right click on the chart i'll actually right click a little bit above the potential entry price right click and we'll do a buy custom with oco bracket that's going to enable us to place an order while also having the potential exits planned out ahead of the time now as far as triggering this particular order now if price was showing that it was going to be closing above the high of today let's say sometime tomorrow towards the end of the close we can just put in a limit order with that bracket order and that's what actually the default is here but seeing is that that price is not above that high yet and let's say as a trigger we're looking to go in if it goes about 20 cents above that that would be 92 74. so what i can do is we can actually

utilize a stop to trigger the entry and stops are used to enter in at theoretically a worse price if you're looking to enter in above the market you use a stop if you're looking to sell below the market which is a worse price that would be a stop loss so i'm going to go ahead and put in 92.74 that will basically be the trigger price if the price goes 20 cents above that high it's going to trigger an order what type of order it's going to trigger a limit order and with that we can specify how much above the current that price are we willing to pay some traders may account for a little bit of slippage there maybe put about uh you know 20 cents or quarter something like that so let's say i'll say 92 94 for this example so what we're saying is if this price hits 9274 on some upward momentum it's going to trigger an order to buy it at 92.94 or better now the time in force is currently showing a day since the market is still open we're going to make this a gtc so it'll be in an effect for tomorrow and then if this order triggers then it's going to go ahead and create two cell orders what we call an oco bracket i'm going to make both of these gtc for good till cancel and then notice one of these orders is a limit order the other order is a stop order a stop market so for instance on the limit that would be a better price we're looking to target whether that previous high or beyond that that swing target let's say i'll go ahead and we'll target the swing target of 98.73 so we go we have that entered and then we have where we can put in the stop and we figured that stop to potentially be 86.95 so we'll make that stop 86 95. we'll hit enter

so now this would be a an example of a stock order where one would enter in if the price breaks above that high hopefully capturing some momentum to take out a previous high and possibly hit that swing high now as far as profit management one of the ideas is if the price makes let's say half of its move and let me see if i can kind of illustrate that here some traders may utilize a fibonacci tool as a measuring tool just going from the low to the high uh a fifty percent of correction i'll actually do it from the uh let me remove that fibonacci retracement actually do it from the entry point uh to that high looking at that 50 that would be right about here at around 95 70. in fact i can go ahead and mark that with just a horizontal line so some traders may consider that if the price makes half its move uh to consider adjusting the stop on that trade in an attempt to reduce the risk on the trade if it takes out a previous high may look to scale out of the trade if we do 100 shares you know may look to scale and sell part of those shares now we'll do 100 shares for our example here today i'm going to go ahead and we'll send this one through we can double check on it notice it says uh buy a hundred shares at a 92.94 stop limit triggered when it crosses 92.74 now once that is filled if it's filled it'll create two additional orders which will attempt to sell it at 98.73 or 86.95 whatever occurs first this is

an oco one cancels other if it stops out it'll cancel the other order if it hits the target it will cancel the other order so i'm going to go ahead and send this through and notice as we look at the chart uh it did not fill because we're not that condition is not met now if the price does keep pulling back we may look for a lower entry for this example but this would be a classic example of a bull flag swing setup now for those of you if you're fairly new to that type of setup we'd encourage you to go ahead and take a look at our technical analysis course which is available on td ameritrade education by the way there's twitter so you can follow and see my schedule there at j mcnichol underscore tda if you go to td ameritrade website and go to education you'll see over here on the left under stocks if you select stocks we have a few courses that are tied to stocks including fundamental analysis you may also see technical analysis pop up under featured education if you can't find it there go up under media type and where it says all there go ahead and select course once there look for stocks technical analysis from here you can click on whether start course or continue course a lot of the principles that i've discussed today are covered in this coursework likewise if you scroll down a little bit you may see sample investing plans and as we look at this somewhat similar although i used a buy stop versus looking for what we would call the cohold here's a sample for bull flag sample investing plan now we've we've talked about as we looked at the market this is not exactly a bullish market to say the least right we're deeper in correction territory we've seen a bear market uh in other indices there's relatively fewer stocks that may have the technical setup that i just illustrated with you today but if we do see a more of a bullish reversal of the overall trend we may see the characteristics of those bull flags now there's the inverse of that which is referred to as a bear flag we've talked about those as well in this class and if you go ahead and follow me on some of our previous sessions via education go to webcasts once there you can see not only upcoming webcasts but if you want to go back and look at this session as well as others you can click on the archive webcast and through there you can also search by instructor again yours truly here john mcnichol there's james boyd there too if you want to see some of his sessions if i go to john mcnichol you can see some of my previous sessions for instance focusing on swing trading you can see last week we talked about trail and stops and more uh if we go back i think about two weeks before that i did not only example of a bull swing but also talked about bear swings which have been more popular as of late and you can see how we try to focus on what's going on in current markets such as around earnings this was not a desired outcome with that session there as not all sessions uh necessarily work uh to our desires but you can kind of see how we try to focus on things uh that are happening now in the market now let's go ahead and double check on see if we have any additional questions there and i want to round things out with a defined wrist spread utilizing some of the divergences that we were talking about there and let's see looks like things are pretty helpful there as far as on the oco the one cancels other do appreciate that and uh those are looking for particular opinions on something we're not here to provide advice but we're here to go over uh you know what's happening in the markets as well as applying the principles based off of trend and support and resistance since we have a tendency to focus on the technicals in this class and looking at things over a relatively shorter period of time and paula says i think i missed it can you take a profit order be in the same oco order with the stop loss yes that is the oco we went ahead and we set a target based off of our profit objective we had an example of a stop loss that the price went against us keep in mind those stops are not guaranteed to fill at that price once triggered they'll compete with other income and market orders and you can adjust those orders as well for instance in the case of the stock trade which should show up on the chart if we're already in the trade you can actually click and drag these orders if you wish to adjust for instance the stop if we've reached halfway to that target okay likewise you can also adjust your limit orders as well if you want to adjust it to that previous high okay now let's go ahead and finish things off with an example on a defined risk a defined risk trade and there's quite a few examples of stocks that have been uh beating up beaten up as far as with the market starbucks being one of them from a longer term you can see some of the characteristics of the divergence prices making lower lows indicator making higher lows both on a weekly chart as well as looking at it from a daily chart now we don't have a bullish candle reversal on starbucks so some traders may wait for a bullish candle to form but notice there is that sign of a bullish divergence let me see if i have another one that's showing a little more of a divergence there bear with me for a moment and i'm have a little bit of an issue in the background here as i'm trying to pull up a few things uh let's see nucor is an example of a stock that is pulled back to a previous high some traders may look for a bullish bounce but we don't have a divergence here as of yet but something we may continue looking at in our breakout and reversals class as well see another one was looking at uh munster mnst this is one that had kind of a bullish divergence as prices were going lower it's actually had more of a bullish reversal as of late more of an inverse head and shoulders and some of these maybe follow up for tomorrow's class on breakdown reversals let's see if we can find another one that's closer to i think it was some of the hotels airlines and even on the tech side so here's marriott on a weekly chart a weekly trend still positive possibly a hammer forming this week price is pushing into oversold kind of a bit of a bullish divergence there is prices kind of making more equal lows indicator making some higher lows all right we are past earnings here and let's say for this example what we'll do is a defined vertical spread utilizing utilizing a short put vertical that's accounting for volatility being relatively high prices being at support and if we expect that support to hold uh we're looking to generate an example of a credit and if the price holds where it's at or trades higher would potentially demonstrate a potential gain this is a class that's actually taught every wednesday by mr ken rose i actually go over long verticals which is another option in our long verticals and diagonal class on thursday but i'm going to simply come here go to the thinkorswim platform go to the trade tab and we're going to go out about uh 20 some to 30 days here we have some june options here i'm going to go in a little bit here let's look at some of these weekly charts or weekly options now sometimes there could be some larger spreads on these options and may require some active management since we're 24 days out i'm going to look at an option that's about slightly out of the money in this case around a 30 delta this spread is a little wide here let's see i'm going to go ahead and right click and do a cell vertical and what that's going to do it's going to go ahead and sell a 160 strike and it's going to buy a cheaper option against it now the risk is defined as this is a five dollar wide spread that potentially has upwards of a buck 35 credit now again a bit of a spread here may not necessarily get that filled may have to be a little smaller of a credit which we can adjust that we could try getting it filled at a higher level and if i click on confirm and send the potential gain on this is what we pay for it the potential loss is greater but this is considered to be a higher probability trade higher probabilities lower reward notice the break even on this is at 158.70 which is about ten dollars below where the price is right now the price stays above 158.24 or 158.70 over the next 24 days this trade would be profitable minus any transaction fees i'm going to position size this to a maximum loss let's say i'm willing to risk about 500 dollars in this trade i can do this three times and the reason why we're showing you this as an example is well let's do it one more time that's actually closer to i believe two let's say i'm willing to risk a thousand dollars in the trade i think i did my math a little bit i took the maximum loss and divided into a thousand so we're just over a thousand this example potential gain would be three hundred and ninety dollars now the worst case scenario for this is that we lose a thousand dollars for this example whereas if i did a stock trade i'm going to go ahead and send this one through we did get that filled whereas if i did a stock trade our risk is not necessarily as defined as prices can continue going lower and lower so in a more volatile market being able to find risk and options have the ability of possibly doing that for you may be an example to consider all right now keep in mind there are risks if we do fall in between that spread we do have a risk of assignment however we would go ahead and look to close out that position prior to expiration and what we're going to target on this example is about 80 percent of that maximum gain so i think for our example here if i go to the trade tab there's our filled order we sold a buck 30. if i can buy back that credit as an example for let's say about 20 cents we have realized the majority of our gain now this takes a little time for it to go through but this is something we'll review next week and would encourage you to consider practicing what you learned here today as we went over some of the current market conditions we did the fundamental elements of a swing trade and we went ahead and explored technical divergences for looking some support bounces and in that case we took a defined risk example by putting in a fixed amount of risk to hopefully profit if the price stays where it's at or trades higher and even the price goes down a little bit that could potentially be a profitable trade as well and we'll go and we'll follow that up next week so encourage a practice which you learn here today folks by whether doing a stock swing trade example that we had looked at or possibly consider a defined risk spread trade also if you enjoyed what you learned here today consider clicking like i don't believe there's a survey if there is james will put one out and remember in order to demonstrate the functionality of the platform we had to use actual symbols keeping in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility so go ahead and click like and if you happen to be seeing at the bottom of the screen we're on the td ameritrade channel right now but i'm usually on trader talks along with james if you click on subscribe here you can go ahead and turn on notifications and be alerted to some upcoming sessions and so hopefully i'll see you tomorrow in our breakout and reversal patterns class at noon eastern time so take care everyone have a great day bye now

2022-05-11 15:31

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