Swing Trading Days to Weeks | Barb Armstrong | 1-12-21 | Conditional Entries & OCO Orders
well good morning everyone welcome to swing trading my name is barbara armstrong i'm a coach with td ameritrade and i am delighted to be here with all of you so if you are not familiar with swing trading let me ask you this are you interested in a trading strategy where you would be in a trade for days to perhaps weeks and are looking for a way to grow your portfolio or to be able to put some gains up on the board with a short-term trading strategy if that's what you're looking for you're in exactly the right place stick around lots of great stuff coming your way [Music] okay so hopefully the volume problem is now fixed um i am not john mcnichol who typically teaches this class as i'm sure you can tell by now um but i'm happy to be filling in for him today john is teaching a course that is running monday through thursday in the evenings and so if you uh haven't joined that course before you may want to check it out he does an absolutely phenomenal job so this morning we are going to talk swing trading and for those that are new because i know that for a lot of people at the beginning of the new year they're embracing learning new things so if you are new to swing trading or if you are new to this class and checking it out for just the first or second time please let me know that okay if you are not getting sound please hit the refresh and if that doesn't work log out and log back in again because everyone else is getting sound okay so as you can see over my head um i'm on twitter as are all the other coaches including cameron may who is in the chat with us today so we are really fortunate to have him he brings a wealth of experience with him and if you are one of the 100 or so people that is joining us live this morning i applaud you for um investing in your financial future by attending a webcast like this and if you have questions between cameron and i hopefully we've got answers i also review the chat at the end of the class and if there are questions that we weren't able to get to i will do my best to address those on twitter so if you're not following cameron and i on twitter you're doing yourself a disservice at b armstrong underscore tda is my handle cameron's is at a cma underscore tda um so welcome to all the first timers that are here dennis and michael and ralph and the rest of the group also um you know to all of you who are regulars here to abraham saul and michelle and charles and radio wayne and louisa and mike and and many many others um thank you for uh joining us this morning let's get through our important information so that we can get right out to the platform we always have a lot that we want to cover and it it always seems like we wish we had just a few more minutes to cover it in don't we so i guess that's a good sign options are not suitable for all investors as there are special risks inherent to options trading that may expose investors to potentially rapid and substantial losses know that if you are new to td ameritrade you have to apply for option trading privileges you can do whatever you like in your paper money account but you have to apply for those privileges in your live account know that all investing involves risk including the risk of loss and in order to demonstrate the functionality of the platform know that we use actual symbols and it's a way to demonstrate these concepts more effectively also however that isn't to be construed as a recommendation on the part of td ameritrade or myself any investment decision you make in your live account that is on you my friends okay so no soliciting no photography um you know i really don't need to say that i know that everyone tends to get along very well in the chat and and often you'll want to keep your eye on the chat everyone because often there are a lot of questions that are answered you know by both cameron and others in the chat these are our greeks now i did mention options you do not have to use options to be a swing trader but many do um so you can you know employ the same concepts and use the stock or you can use you can use options so we're going to go out have a quick look at the market and for those that are new to swing trading i'm just going to take a minute to talk about what swing trading is and kind of a general overview and then you know we're going to get out and do some trades because i think that's the best way to learn and so um [Music] yeah sorry i'm kind of glancing at the chat as we go along so you know as we go we'll be placing trades now i don't typically teach this class but in you know when john he not only places trades but then week to week you go over the management of those trades because it's one thing to understand when to get in it's just as important to understand when to get out okay so that's critical also alrighty so let's go over to the platform okay spoiler alert etsy up here so let's look at the s p 500 and i don't spend a lot of time on this because i know that if you go to more than one webcast and today chances are you're going to see this conversation multiple times but the net of it is this is a one-year chart and we can see that overall the market is uptrending and you know the last couple of days have been a little flat but on friday the market hit a new all-time high and if we come and we look at the nasdaq uh same thing new all-time high on friday um and then pulled back yesterday and who knows what today will bring the bell has just rung um but we're looking at definitely an uptrending market and then we're going to come and look at the vix so here's our our trilogy many like to look at the dow also but the vix is our fear index or our volatility index and we can see that in the context of a one-year chart that volatility is is pretty modest at you know 23 76 and certainly it's come down a long way from where it hit its highs back in march but if we come out and we look at like a five-year chart it's actually at the high end of the range over the last five years okay so why do we care about volatility well it gives us a sense of confidence in the market it also when we take a look at volatility it gives us if one of our questions is would we rather be buying or selling um you know when options when volatility is high options premiums tend to be higher and so it it's more expensive to be a buyer and more profitable potentially to be a seller and so this can help us make a more informed decision on which type of trading strategy now with swing trading strategies those are more often buying strategies because they are so short-term you know we're looking at a trade where we're going to be in for days to weeks on average so let's come and look at a stock like man let's start with nike okay this is our five-year chart we're going to come back because this is just a shorter term chart i mean obviously you know nike's been up trending over the last five years but when we come and we look at the last six months and i'm going to take this off and we can put this back on this is something that has definitely been uptrending right right so if we look at this and we say okay this could be a bull flag setting up today um are we ready to trade this today well perhaps not but what because what we what what some traders might say is i want to wait until this pullback is complete but others might look at this and say well the last two days when we look at the previous high not the the tip of the wick but the body of the candle it had broken above and now today and this is it's not uncommon at all for this to happen let me just redraw that line so it's not uncommon at all for something to break through a resistance level and then come back and retest um there's a question in the chat about sharing the script the sma with the breakout signals and i just posted that on twitter a few days ago so if you want to go to twitter phil um or bruce it'll be there okay so when we take a look at this if this is pulling back what we could do is say you know what if we were assuming this were a candle at the end of the day we could say you know what if it goes above today's high you know we would like to enter this trade so we can come here and this is where we might change our drawing tool to our fibs to get our to to get our target because often with a swing trade the idea is that we see an uptrend we want to capitalize on it okay so somebody is asking me to just up my mic a little bit just one second so let me do that okay so hopefully that will be a little bit better okay so i'm going to switch this to the fibs now what do the what do the fibs do for us well it's a it's one of the tools we can use to provide a target and so if we look at this and we say well if we just come down here our target could be this 148 level if we're doing something super short term others might take a look it and say if i were looking at this trend overall you know i might make that a little um a little bit further out but if we take a look at this and we say okay well i'm going to trade this um to the you know 148 77 level so this is one potential target we could have 140 i mean i'm going to write that down and another target we might have i'm just going to remove that one we might say well this move and i'm going to bring up this drawing tool if this was about an 8.50 move and i just replicate that so i duplicate my drawing where might my target be it might be around 154. oh move it further from my mouth okay and so maybe i turn it down a little bit okay so if we go with this target of about 154 would we want to get in right now well we might say i'm going to put in a conditional order and i only want to get in if it in fact or when it continues its upward journey so if our high today and in order to see the high if you hover over a candle so if i'm hovering over today's candle and i look up here it will tell me the high for today so our high for today was 146.85 146.85 and our you know support level here is around this 144 69.
why do i care about that well that's going to determine where i put my stop so if i take that 144 69 and i multiply that by 0.99 i'm going to get my stop so i'm going to come over here to the calculator 144 69 times 0.99 because if i'm wrong or if the investor is wrong they would rather take a small loss quickly than to wait and take a bigger loss and sometimes in spite of all your superlative technical analysis you are going to have losing trades and if someone tells you they have not had a losing trade then probably one of two things is happening either they're suffering from a memory loss or they haven't traded very often well the third thing is they're just not being honest with you because even the best of traders is going to have trades that will go against them and you have to plan for that so if we say okay if this trade goes in the wrong direction we are going to exit and that exit would be at 143.24 and what's our target on this well our target was at 154 and i'm writing that down too and when do we want to get in well if it goes 20 cents above today's high so or you might say well my rule is and it's a great thing to have rules with any type of trading strategy so my rule is if the stock is under a hundred dollars i get in 20 cents above if it's over a hundred dollars i make it 50 cents so if we made it 50 cents then that would be 140 735 if math serves me correctly so to put this trade on we would come to our trade tab and if we want to do this as an option trade now one of the questions is well which strike would we pick well i'm going to come here to i call it barbs basic you know option chain or i've called it my basic option chain you know you can customize your trade tab so this has the bid the ask the mark delta and open interest so why do we care about open interest well we care about open interest because we want to run with the crowd so we can see that you know nike typically trades millions of shares every day it's been the market's been open for 14 minutes and it's already traded 336 000 shares and we have when the market opened this morning there were already 2300 contracts on the at the money strike now this is at the 150 but we're just above 145 at 145.68 so i know that we would be paying a little bit more but if we did the 145 strike then we already have some intrinsic value in this option and if we're looking to get out at 154 now this is a personal choice and there's no right or wrong answer it's not like wow she blew that because she bought the first strike in the money um you know versus the first strike at the money when these are five dollar spreads um and you're just barely in the money so some will choose that strike and what's the advantage well you have a higher probability that come february 19th that the 145 option is going to be in the money okay and we had if we have 1800 contracts on the book so if your rule of thumb or if your particular rule is i want to see you know at least 20 times the number of contracts i'm going to trade or at least 10 times the number of contracts i'm going to trade many traders will have a rule around open interest why because they they will have a rule also around bid ask spread which means that they don't want this number to be wider than pennies ideally but 10 percent at a maximum because if it costs you 10 a 10 spread to get in and another 10 spread to get out it's harder to have a profitable trade or that's chipping away like that pacman at your profit so when we take a look at this and we say okay it's just over 10 cents it's about 13 cents or here it's 15 cents on a five dollar um option so 10 would be uh 50 cents so it's it's not even five percent so if we're okay with that we would right click now you know we're going to get in when this is a little bit higher because currently it's pulling back today and so why wouldn't you say well why wouldn't i rather buy the option when it's cheaper because we're trying to stack the deck in our favor so if it hangs out and pulls back for three or four days time decay is chipping at our value we would rather get in only when this continues to go up does that make sense okay okay so we are going to buy custom with an oco bracket because we're putting in both a target of when we want to get out given that the trade goes with us and i'm an eternal optimist so i always say you know this is when we intend to get out and then i like to say in the highly unlikely event um but you know we we as i've said we all know that there are going to be trades that don't necessarily go our way so i'm going to make all of these good till canceled well why is that it's because it may not go up today so on our entry we're going to make this a market order and we're going to make this a market order to get in if and only if or when and only when this stock goes above 147.35 147 35 and then i am you know i want to draw your attention to this you want to make sure it says that now this says less than or equal to is that what we want no we want it to be greater than so this is why it's important to read this and make sure it reads as you want it to read and then when do we want to get out well not when the stock the option is at a certain value we want to get out when the it when the stock hits what price um our target on this was 154 so when it's at or above 154 now i'm doing this one as an oco the next one we'll we'll do in a slightly different way just so that you can see different ways of of entering these and we want to get out like i said in the event that it goes other than according to plan at 143.20
so we've got a whole bunch of market orders here so this is when it's really important to make sure you've read this and that it reads like you want it to rank uh read sorry ah this is i'm swinging around here pretty quickly so we're going to put this in our swing trading group um on our monitor tab we want to buy one february 19th 145 call when nike goes hits at or above 147.35 that's our entry and we want to sell when it hits our target of 154 or in the event that uh nike falls below the current support level old resistance becoming new support we would like to get out one percent below that support level at 140 320. how much can we make our max profit is actually unlimited um but you know we're putting a limit on it because we're saying we want to get out if it hits 154. and how much can we lose the absolute most we can lose is what we're paying to get in which their estimate is about 507 dollars for one contract now if we were willing to risk a thousand dollars on a trade then we could do two contracts so we could easily come back here if you read this and you said oh i meant to do two i'm going to link these together and we can make it two come back to firm confirm and send when you do that you have to reassign it to the group again so we're going to come down to swing trading and fire in the hole now i said you know the most we could buying power what account am i in here there's something weird happening with this account let me just i'm going to sign out and sign back in again i've not seen that happen and we have a bunch of things we want to do so i want you guys to be able to see that okay and while this is reloading i'm just going to scroll through and see uh if we have any questions that i have missed answering yeah so if you want to load the macd and the stochastics you can pick a standard option and you can just choose show breakout signals so phil is absolutely right on that but the one i'm using happens to be a script that i believe was set up by ken rose and he's a script maestro and if you're interested in more on scripting he teaches a class that is now on friday afternoons so you may want to check that out also if you're new to all of this and you're new to technical analysis you'll want to join cameron may's class on mondays at 11 o'clock eastern nine o'clock mountain time getting started with technical analysis and charting essentials if you're already feeling comfortable you know school is never out for the pro particularly i think with respect to technical analysis and pat malali teaches an awesome class on fridays at two o'clock eastern noon mountain so i'm going to come to the monitor tab there's something going on with with this for some reason i'm not quite sure why so i'll have to make a call after this but we're just going to go ahead and put these trades in because i know that that trade would have set up properly um okay so the next one i wanted to look at was etsy oh dang it look at that um you know it's up 11 today you know so this was kind of the perfect setup and so you know had we put this trade in yesterday we'd be doing the happy dance right now because it would have hit our target um and we would have been in this trade for all of one day um and so now what we would be looking for is a break above so i'm going to come here well snap well we know it was a decent setup so sometimes when we look at these we can say oh wow have i missed it but others might look at this and say well what i see is a really long bull flag here where it started here had a nice run up spent about a week or so pulling back and is now moving again to the upside so this first target it just hit this morning which is this swing target but if we go for the pole target where might that be and again we have a couple of ways to measure that so if we come here and we look and we say okay if we start here oops just to show you a couple of different measurement strategies so here was a 75 move in about 26 trading days or about 35 days and so if we said well this could take 35 days but if we take a look at to move this 65 dollars and again you know you just you click and draw and so if we look at this and we say okay you know i've got a 70 almost a 74 dollar move and we're looking at about a month now here i've run out of room so if i want to add room to the top i can come down here to my price axis and say you know what i need some more room on the upside so give me 30 instead of 20 percent by the way i post little tips like this on the thinkorswim platform all the all the time um and so you know that's something that tends to be pretty popular so we'd be looking at a move up to about 272. so does that make sense it's it's sitting right now at 205 and it crossed this line here around 197 so if we add 74 to that 197 that would give us about you know it's in this neighborhood of 272. so if we look at this what kind
of time frame did we say we were looking for well just over a month so if it takes a month how far out do we want to go from a trade perspective well we might look at this and say if we're going to do an option on this we would look at this and say well february is 38 days it might take 38 days to make the move and because if we're buying an option time decay can be coming and chipping away at the value then we might want to come out to march so what is the difference between the february and the march time frame well we've got almost double the amount of time we've gone from 38 days to 66 days and time has value you know so here this is an expensive option you're looking at you know our our two and these are ten dollars wide also so if we do you know this 210 option you're looking at 14 14 to 16 dollars and we've got about a and some might look at this and say wow that's a pretty wide bid ask spread but you've got high volatility on this stock and you know on a 15 stock you know something that is in this range is you know it's around 10 not quite 10 or it's around 10 so if i come out to march and it's interesting because this is a two dollar widespread when i look at the march 210 it's only a buck it's it's actually 95 cents so it's less i've got 400 contracts um a 53 chance of it being in the money so that's our delta now this is a fluid number is this delta going to stay the same well if etsy continues to go up the the delta and the probability of it continuing to be in the money is also going to go up now if etsy started to go the other way our probability of in the of it being in the money would also go away um so if we look at this and we say we're willing to risk a thousand dollars on a trade um this is a pretty high priced option so we have a couple of choices we can say okay i'm going to put a stop in that says if it gets to a thousand i want out um you know so we can price get place our exit based on the price of the of the option or we can just say let's have a look and see you know if in two weeks this went out and it hit our stop approximately where would we be but what we're risking here if we did this option would be just over two thousand dollars that's the most we could lose but it is an amount that we could lose so we need to be aware of that okay so if we come back to the chart and we say okay well our breakout level is this 196.78 and if we went one percent below that so we're not giving ourselves a lot of room for error so if we say 196.78 times 0.99
oops i did something wrong there 196 this is my nemesis 678 times 0.99 okay so if it hits 194.81 we would be out that's our stop and our target well if we're looking at it hitting around that 272 273 mark how many times have you seen something come like oh so close it just about gets there and it doesn't quite hit and then it turns around so how about we make it 269 our target so just a couple of bucks below that so if we come to the trade tab we come out to march and we just say we want to buy so this is another way that we can enter this so we just want to buy a single and then if we come down here to where it says advanced order this is another way that we can put this order in and many traders they have they will do things exactly the same way time after time after time but we just want to change the single orders to a first trigger sequence so we're going to change our order here to first trigger sequence we're going to come up we're going to right click on this line create an opposite order and we're going to make that good till cancelled we're going to make it a market order and this is just some would think a faster way to put this in because we're going to say we want to accept and again many traders always do things in the same order um you know my son when i was teaching he was learning long division it's like why do you always have to do it the same way i like to mix it up it's because you're less likely to make a mistake when you you do things kind of in in a habitual pattern right so our target was 269 so at or above and as i said i'm ever the optimist so i'm always going to put in where i expect it to go first and then in the event that that it goes against us our stop was 194.81 sorry i have this big mouse so that you can see it but it makes it a little harder to maneuver 194.81 okay and again we're going to want to come down here and it says you know wait until one of the following conditions is met if the security year is greater than or equal to 269 get us out and if it is less than or equal to 194.81 we want to exit the trade so we're going to save that confirm and send and we're going to put this in our swing trading bucket so here we're saying max loss 21.25
we're going to come down to swing trading fire in the hole now what i want to do and we'll fix this later what i want to do sorry come back to our trade tab is come to theo price now as many of you know i started with td ameritrade as a client and a student of this education i thought theo price was one of the coolest features i'd ever seen when i first saw it um so if we come to theo price and we chose the march expiration and the first thing you're going to always do is hit reset and then we're going to come up here and say well if we were expecting this to move in about 30 days i would come out to february and say let's say by february 8th it has hit our target and gone up 70 let's call it 70 dollars where is it now 204 and our stop was 269 so it's gone up 65 dollars by february 8th what would this option be worth and this is guys like this is this kind of estimate this is not a guarantee because volatility might change um lots of it might hit this target in half the time it might not be quite there yet but this option that we just paid 2 200 for would be worth or could be worth in the ballpark here's our theo price of about 6 200. you know and that's um you know based on a here's our mid price so almost triple almost at 300 return and this is when people get really jazzed about options but remember what's your potential loss well it could be the entire cost of the premium where if you bought the stock and the stock you know etsy doesn't appreciate in price at the end of 66 days you still have the stock and it's still worth about the same price where the option could be worth nothing so you always have to look at the downside but if we're using theo price if instead of going up let's say in the next week it came down and hit our stop so let's go back i'm going to hit reset and we put our stop at 194 so well 194.81 so about nine dollars less so if we said what if a week from now this came and hit our stop nine approximately nine dollars lower than it is right now so 204 36 that would have um sorry 195.94 oh our stop is 194 so let's make this 10 minus 10 oh well that's because the price of the stock keeps going up okay so if it were to come down to that 194 range this option that we just paid over two thousand dollars for would be worth about fourteen hundred and seventy five so if i take a look at fourteen seventy five divided by 21 i'll just use the current mark price we'd be down about 30 31 percent now if it was the stock and we were down ten dollars you know doing rough math we'd be down about five percent instead of 30 percent and if we just bought the stock and it went up and we hit and we do the same thing so how would we do this with a stock well we right click buy custom with an oco bracket so we'd buy a hundred shares of the stock um and then we'd look at getting out when it hit the target at approximately 269 so we can do the same thing by buying the stock and we're going to make that good till cancelled and if it goes and breaks that support level we would want to get out at 194.81
so same target same stop and would we still incur a loss absolutely you know how much would this loss be well if it went down ten dollars a share we'd be out a thousand dollars and if our max loss that we're willing to incur is a thousand dollars well there we are and then how much can we make well we're we're capping our gain potentially and that we're saying you know if it goes up when it goes up and hits 269 and we want to exit we'd be up about sixty four dollars a share and so our our potential gain on this if it hits when it hits our target is sixty four hundred dollars does that make sense okay let me just scroll down here in the chat yes verticals there's a comment saying verticals have defined risk so this is one of our ways of us trying to define our risk if you're interested in verticals there's a class on wednesday on short verticals wednesdays at 3 o'clock eastern on thursdays it is long verticals and diagonals taught by john mcnichol and wednesday's is taught by ken rose so verticals are another interesting strategy not a swing trading strategy you know so here we are and again is this a guarantee when we put a stop in that we're going to get out at exactly 194.81 no there will be a market order generated and it will fill up the next available price and that could be you know we could end up getting filled higher and it could be lower so but it will generate a market order and again we're treating this as a swing trade you know some might buy this as a trend trading growth stock but we're doing this as a swing trade and so if we put it in in our monitor tab that way then we would know that this is what we want so we're buying 100 shares at the current price actually we'd have to edit that because it's now trading at 206. since we started putting this trade in confirm and send swing trade and it's going to bounce just because i have an issue with my account this morning but you know we want to sell when it hits our target or if it goes against us which is down ten dollars a share um we would exit then and we'd send that in okay so i have a couple of other ones i wanted to look at we're running out of time as you know we so often do but apple was one of them haven't looked at apple since so it's interesting because apple you know it's a 128 dollar a share stock we saw that you know in the greater context this is a stock that has been uptrending you know one of the key drivers of you know the increases in the s p 500 last year um it you know had a stop four for one stock split kind of consolidated broke out but what we're seeing today is it's continuing to pull back but one could look at this as a potential bear bull flag but we don't have that entry today so you might want to practice again a conditional entry in your paper money and then where would you put your target well if you put your target at this swing target this 138 ish target you might say well that's only ten dollars but if you're looking at an option and if it were to move up ten dollars you know what kind of profit could that potentially provide so i encourage you to run the numbers go to the trade tab look at the theo price and run the numbers on what type of return and then place a practice trade another one that you might want to look at is xom and again you know we all started when the market opened this morning and so here's another example this this is a in a sector the energy sector that has been getting clobbered um over the last not just year but the last multiple years well how do i know that well if you come over here and you look at sectors and industries and we take a look at the energy sector you just click on energy we can see you know today it's up the last three months it's been up you know pretty significantly but over the last three years and five years it's really been hit pretty hard i'm sorry over the last three years hit pretty hard so things are kind of coming around um so you might say well maybe here's an opportunity and so if we come and we look at xom and we look at it a little more up close and personal we can see it just recently broke above and again you know you might say well friday might have been a better day but if you you know do your fibs and again practice practice with these tools we've used actually a lot of different tools today you know so if we set this 161 fib extension as our target um you know go to theo price and see what type of return it if you got stopped out one percent below this level what might that penalty be how much might the pain be um and and run through those numbers so it's not that i like to give homework said she giving homework but you know what if i can give you um a to-do it's practice and then trade these in your paper money and trade it as if you were trading it in your live account and by that i mean um take it seriously and is this something that you place a trade and it set it and forget it no so many investors or many traders will have a set of management rules and they'll say hey if this doesn't go half the distance in half the time i want to exit the trade well what's half the time and what's half the distance and then make a note in your trading journal or if i have two days down days on a bullish trade then you know it's not going in the right direction so i'm going to exit the trade and then look to re-enter so make sure you have a set of rules that you are going to trade by because we can have situations where it doesn't hit our stop and doesn't hit our target and languishes in the middle and meanwhile time decay is coming and munching away at our profit so you need to have some mid management rules as well so guys that's a wrap for today i really appreciate you joining me um we did a quick overview of the market we took a look at what swing trading was it was a short-term way to try and generate returns or gains in your portfolio we looked at several example trades and i hope you keep coming back and if this is a new strategy for you continue to join john on a weekly basis if there are other areas that you think need shoring up so if you're not familiar with long calls if you go to getting started with options um look up the long call strategy um and i can post a link to that in at the end of this session i'll also post a link to john's class from last week and then you know if you're new to technical analysis join you know cameron on mondays if you want to continue to grow in your technical analysis knowledge join pat on fridays so guys thank you so much for joining me keep in mind that the examples we looked at today were for example purposes only all investing involves risk including the risk of loss none of this was a recommendation i salute you for joining us today thank you so much given there were no technical glitch glitches this will be seen in the archives and you can watch it again also i saw that there was a survey posted in the chat and here's my commitment to you if you will click on that link and give me some feedback what did you love what would you like to see more of those kinds of things i promise to read every single comment and i can pass that feedback on to john as well so thank you thank you for joining me if you enjoyed this hit the like button subscribe to this channel if you haven't done so already and i will look forward to seeing you in a webcast coming up soon take care everyone bye for now you