Technically Speaking: Trading the Trend | Ken Rose MBA CMT | 5-27-21| Using Moving Average Analysis

Technically Speaking: Trading the Trend | Ken Rose MBA CMT | 5-27-21| Using Moving Average Analysis

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hello everyone and welcome to our session here today looks like we've got a great group here i see a lot of familiar names i want to welcome shree and and the colonel and mike and e day and cola and david and ricardo and yoko radio wayne edward lee charles woodsman franco grace everybody else great to be here great to have you here today as well so um interesting things going on in the market we'll be discussing trends here today i did see a question over here in the chat we know i can address that here momentarily as well just like to ask all of you a question when you think about the different indicators that we have available to us as looking at things from a technical analysis standpoint what would you say are two that are most commonly used together and tend to have some of the greatest impact with regards to markets i'd just like you to think about that here for a moment before we get too far along though let's go ahead and run through our disclosures and before we do that let's go ahead and get off to our start by running our little our slick little video here then we'll go ahead and jump right in and get going here [Music] so again welcome over here to technically speaking trading the trend weeks to month ken rose here filling in for james boyd who will be back here next time i fully anticipate i want to thank michael keeley for being over there in the chat window to address your question just a little heads up you can follow myself and michael on twitter my twitter handle is at krosc underscore tda and michaels is m keeley underscore td i'm sure mike mike michael would be more happy to send that to you over in the chat window we both try to we both post things related to this area as well as other areas of investing that we feel will be beneficial to you in way of disclosures here today just a reminder that in order to demonstrate the functioning of the platform we need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your account of solely responsibility we do use the paper money application here this is for educational purposes only we want to keep in mind that successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions do change continuously also we do we do discuss technical analysis in here you do want to keep in mind that other approaches including fundamental analysis may assert very different views with that let's go ahead and move right along here here's some greeks if we do some option trading i don't anticipate that but if we do we'll go ahead and discuss the greeks as we're going along with that you just want to do keep in mind that options trading is not suitable for all investors because of special risk transaction costs and like alrighty here's a picture myself i specialize in blending both fundamental analysis with technical analysis i love what i do because i love i love to learn i've always loved to learn new stuff there's always opportunities to learn to take new technologies applying those to new and different strategies i love to trade in this area as well as teach in this area i'm a contributor on the td ameritrade network i'm also a charter market technician i work with think scripting building indicators trigger strategies and the like with regards to our agenda here today we'll we'll discuss definition of trends okay our primary focus here though will be a scan for up trending stocks but my goal here today is to leave all of you with it with a tool that you can consider using us i'm not recommending the tool or anything like that but just a tool that you can that i'll place in your hands and you can consider issues with regards to identifying up trending stocks that could have some momentum in relationship to those up trends and we'll look as part of that to do a paper trade example now i did see a question over there in the chat window that came up um with regards to an indicator on the thinkorswim platform and that indicator was um profit loss i believe is the one yeah the the the p l you know the reality is that's not really an indicator it's more of a calculator i just want to address this question quickly because because it is something that i use on a frequent basis and it's but the reality is it's not used that that often because i'm using think scripting back testing on the thinkorswim platform it it it is a great tool but i would say that it that it is not in wide use okay but what that does is it basically shows you when you do back test with strategies it shows you at dollars and cents it's not a percentage it's a dollars and cents others is showing you um the amount in in dollars and pennies of the profit or loss with regards to the strategy that you're currently back testing and again it's not really an indicator it's more of just a calculator just calculating where you're at with regards to profit loss if when you're doing some back testing okay so i just want to touch up on that well first of all definition of trend let's go ahead and pull up let's just jump right in here we'll get going on here on our agenda so i'm going to pull up the thinkorswim platform right here and let's collapse our left hand side right here and chat a little bit about trend and to do that let's start off with the spx okay so here we have the s p 500 and notice i have two indicators here i have one indicator right here and one indicator right here remember the top i suggested think about two indicators that are often used together that tend to have some considerable psychological impact on the markets and those two indicators for those of you that may not be aware of it look over the chat would i probably see some chats will come up that will identify those two indicators is simply a 50 and a 200 period moving average and some key things occur first of all if a security breaks down below the 50 you could get a cascading effect where the security will sell off you can also have a situation if a security approaches the 50 it could find support there and bounce off on our chart right here we're going back six months notice on the s p 500 how many times we've got bounces we came right down and found support at the 50 found support of the 50 one day below it then back above it found support at the 50 found support of the 50 found support of the 50 found support of the 50. so again a key psychological area for investors if we break down below there maybe stay down below there for a day or two you can have the stock there could be sort of sort of a reverse with regards to posture and you can have what's called cascading where one investor goes and say oh we're breaking below the 50 i want to get out so they get out other investors get out create selling pressure and can move the stock down rather dramatically now in addition to price action you have the moving averages themselves when one crosses above the other crosses below the other that's sometimes referred to as a golden cross if it crosses above that's that could be a bullish golden cross if it crosses if it crosses below that could be a bearish gold across that would be when the 50 right here crosses on either side of the 200 period moving average well how does this relate to trend well you can see right here first of all we have the price consistently above the 50 period moving average that's an indication of trend strength another indication of trend strength is to have the 50 right here to have it above the 200 period moving average another indication of trend strength thirdly is we can look to see if the distance between the two is increasing if we look at the distance between these two over here and we compared to the distance between the two over here we can see that that is increasing so again what are we looking at we're looking at three three characteristics here first price above the 50 1 50 above the 200 2 and the distance between the 50 and the 200 increasing three those are three things to look at with regards to a stock that is currently in a strong uptrend so with that having been said then as far as discussion of trend of course we also know with regards to trends let me just back up just just a little bit here for those of you that may be a little bit newer to technical analysis the other consideration we've talked about things kind of zooming out looking at it from more of a wider perspective but also you want to have the price itself not only be above the 50 but have the highs getting higher and the lows getting higher okay we actually had a little circumstance just last week where we rolled over to lower high after making a lower low indicating perhaps this uptrend was over however we broke out of that channel right there started moving to the upside so as investors if you're thinking about investing we're thinking about trading the trend when would be a potentially ideal time to look for an entry on a stock well there's nothing wrong with with looking at an entry when you have a scenario like this there's nothing wrong with that you just look for a pullback possibly in a bounce or possibly a breakthrough resistance there's nothing wrong with that but another possibility would be this when did this trend get underway let's go back further in time here i'm going to come over here and let's go back maybe a couple of years right here so we can see right here the 50 crosses below okay and you can see the in this situation the stock actually the security the s p 500 bottomed out when that occurred this was a rather rather unusual sell-off though right that's the whole cova thing where the market took a huge crash and did it in a very short period of time right here you can see the 50 crosses back above and notice when the 50 first crosses back above notice the ascent of the price movement how steep it is then we came back down here and we and we start with regards to price we started to settle down a little bit and then we're settling down right here but it's not unusual when that 50 first crosses that 200 to see a rather rapid ascent as you have what's called a cascading buying effect coming into play so let me do this i want to share something here with you i would like you to do is to let me just see if i can pull this up here should be able to i'm going to send this to you over in the chat window then i'm also going to post it on the chart so those folks that are catching this via archived have availability to it now by the way this is not a recommendation to use this okay it's something you can choose to use it's also something that you can modify extensively and i'll show you that what i've just said over the chat window for right now i would just i just go ahead and copy it and and hold it here for a moment or two and what you could do is you could copy it you could put it in a word document or put it in any kind of document i guess just copy it so that you have it to use after our session during our session right here i'd like you to do is kind of focus on the discussion of how to use what i've just said over there what i just sent over to you is a link that will allow you to bring up a template for a search that addresses the 50 the 200 and some other characteristics of what some investors will be looking at with regards to an up trending stock so that's over there in the chat when i also want to bring it up over here on the chart so to do that for those of you that are catching this via the recording here it is up on the chart what you could do is you could just write it down i'll make a little bit bigger so that you can see it here again not recommending its use just suggesting you pulled up play with a little bit and see if it's something that's useful to you if you don't feel like it's useful to you then don't use it also keep in mind it's not guaranteed with regards to accuracy or time now this link you can write down the entire link but you really only need these last seven digits right here okay you can use the whole link or just the last seven digits and those last seven digits are uppercase t the numeral two uppercase b then then a lowercase l that one's a little bit tricky lowercase i lowercase j and then an uppercase p okay once you have that the way that you implement this on the thinkorswim platform is come up over here to setup click on setup choose open shared item paste it in here like so then you click on preview after you click on preview there's a place here to give it a name i would give it a name related to a scan think about a scan and think about we're scanning using the using the 50 to 200 i think it icologists just trending 5200 but you can give it any name you want to okay and then after you give it a name you'll import it then once you've done that you'll be able to bring it up over here on the scan page right here in the interest of time i already have it up here but again after you load it to bring this scan up you don't have to go in and add these things you can add these things and i'll show you how you can go in and change these things as well okay but you'll have it here and just when you come over here to the scan page just come up here to this top menu up here right up in this area right here okay again we're on the scan tab right here so just click on this little guy right here well it's not that one it's the next one down it's the one next to the flames there's the flames right there so right here it's going to be that menu right there so you click on that menu here say load scan query and it'll be here and in personal under the name that you gave it i'm not going to load up because we we already have it loaded up okay but then when you load it up it will come up and it will look just like this so how is this scan set up then well first of all we've got a stock filter here that just says we want the minimum price the stock to be at least 10 or higher you may want to change that you may want the minimum price of stock to be 20 or 30 or 40 or 50 or maybe you're okay trading five dollar stocks feel free to change it this again is a template for for use and for modification right down here we have another filter this is just saying that the average volume on the stock is at least five hundred thousand shares a day now you may want that to be a million seven hundred fifty 000 put adjust that any way that you want it okay i'm going to skip this one here for now we'll come back and catch this one because this one is going to be the one that may be a little bit of a mine crunch we want to save that one for last this one right here okay this is saying that the close in other words the closing price is greater than the simple moving average 50. so this ensures what this ensures the price is greater than the 50 period moving average okay now this one right here this is saying that the 50 period moving average has crossed above the 200 period moving average and it's happened within this little within here i believe goes back 20 days so this not only assures that the 50 is above the 200 but the cross was relatively recent about 20 days ago if you want something further along you want to feel you want to feel totally free to adjust that you come over here to adjust this one this this is one of the key ones to adjust the second one is here and we'll come back and look at this but right here just click on the little pencil right here a box will come up like this okay and you'll come in here and click on edit and then right here when i scroll down here this is how many days is right here saying okay the 50 has crossed above the 200 within 20 days if you're okay with it being longer than that have at it make that a bigger number and that's totally okay if you want it to be shorter than that you can change that to one day you may not get any results because the strength of the overall market i mean you may get some results but but i don't know but i i have it currently set here 20 days so that should be where yours is set when you initially have this okay i'm going to go ahead and click on cancel here i'm going to click on cancel there so you know how to adjust this one this one right here is that is the is the tricky one now before i go any further investors i do want to make another statement here this is a scan that uses studies okay right now you're not able to use studies on the paper trading platform now it's possible using the link you can get around that although i don't think you can so when you're setting this up you'll have to do it on your live trading platform but we're just scanning here we're not buying or doing anything like that we're just scanning okay so last but not least is this section right here this one actually uses a custom script but you don't have to do any scripting i'll show you there's just one place where you can make an adjustment on that's all you have to do but i will need to show you it does get kind of psyched out a little bit when you look at this but what this does is this just ensures what it ensures that if we're looking at these two moving averages it ensures the distance is getting greater and you can adjust in here you can adjust what that distance is and if you put something in there like five percent you won't get any results it's just the nature of these moving averages the distance can be greater but you usually want to start with a very small percentage but it is adjustable and so feel free to adjust any any way you want to so how do you adjust this one come over here and click on the pencil right here this is going to look different it's going to look a little scary the reason that looks scary is because that's scripting in code well keep in mind don't worry about all the code stuff there's no just don't worry about it okay i'm gonna be able to draw with this don't worry about all this stuff okay this is the only thing you want to look at is this right here okay that says and right over here it tells you what to do here it says enter percent difference and notice what it's currently entered at it's it's at one quarter of one percent .0025 is one quarter of one percent that's the only thing you do in here is just adjust that one number be careful when you do it because if you if you mistype things you you could create a problem in fact i'd i i would write down what what the default is and here's .0025 just so you

know what it is i'm going to go ahead and click on cancel okay so this scan is meant to find trending stocks right stocks that are that the price is above the 50 the 50 is above the 200 and the distance between the 50 and the 200 is expanding or getting greater okay all right so with that then after you do that you can go ahead and run the scan notice i ran the scan here and how many results did i get i got 37. when you think about it we've gone through a lot of stocks right we went through 7009 stocks and we ended up with 37 that had those parameters in different market conditions you'll get you'll get a different number of results now remember what i did on this scan is i gave the scan a name okay i think i call this scan trending 50 200 i have a couple of versions as i was putting it together okay but but the scan does have a name so right now we're looking at our results there's a couple things you can do here one is you click on this guy right here and you can save the results as a watch list and that's fine another thing you can do is you can customize your results here a little bit you can click on this little gear right here and you can customize what's showing in your columns and you can sort by those columns that's something else you can do because we're talking about trends and we're talking about looking at things more from a visual standpoint we'll look we'll play the we'll play the part of the investor that wants to just pull this scan up as a watch list so can we do that on the thinkorswim platform can we pull this scan up on the watch list well let's open up let's come over here and open up our left hand side over here and i've got to watch this up right here let's see what the name of this watch list is before we do that let's just double check what's the name of the scan that we brought up well i'm going to click on this whoops we want to go to the right of the fire here i want to click on this i'm going to choose i'm going to choose load scan query we're going to come over here here's personal and this is it's this one right here it's trending 50-200 price that's the one that's the name it is notice what's over to the left of the name to the left of the name we have this kind of circled thing and the circle thing has this sort of target in the middle of it okay well that's that's the name of the scan and that's how you bring it up over here now that's the name i gave it when you implement this you'll bring it up by whatever name you gave it okay let's come back over here then and here we have a watch list over here in the gadget area what is the name of this watch list that we have here i'm going to click up here to identify the name and it has a personal name i'm going to come down here and notice what the name of the watch list is it's the same name so the watch list function over in the gadget area it actually performs two separate and useful functions one is just a listing of stocks that you put together or a listing of stocks that are that's provided to you as a public watch list you can bring up the s p 500 to russell all different kinds of listings so one the watch this function provides you with a listing of stocks but two the watch this function provides you with a listing of search results and that's and that's and that's what i have that set up to i've actually brought up this watch this search over in the watch list and that's what this column is right here okay so if we want to look at these stocks then and look at them on a chart look at them from from a chart perspective then we come over here and pull up charts right here by the way there's our there it is one more time if you want to jot that down folks that are catching this as an archive recording that link there again last seven digits is uppercase t the numeral two uppercase p lowercase l a little bit tricky one there lowercase i lowercase j and then uppercase p okay so i have these stocks over here by the way let me come back over here to the scan you may be looking to say wait a minute that's not the same this starts with adt and this starts with g p o r i actually came in here and i sorted these by percentages if i came over here and did a right click here and chose no sorting then they match up there's our adt akam amt and all the other ones let's go ahead and let's let's sort and bring the ones in our watch list here that have had the greatest percentage movement to the upside today doesn't mean they're going to be excellent technical opportunities but that could help us to get off to a little bit of a good start there's also probably going to be a fair number of these that perhaps we could use contingent orders in to help us to get in at an opportune time in relationship to whatever the trend may be let's pull up a chart and just check to see you know this was doing this earlier today kind of weird i'm not sure why there's a little bit of a glitch currently going on with this account with the with tos in relationship to the functionality we're doing here it's shifting back to a to an earlier version on this which i've already deleted and saved differently so that's kind of kicking around there i'm just going to come over here see if we can get this back to where it should be let's come over here to futures for a second then let's go back and hopefully we can catch this trending here now you know what so frustrating when you have a so frustrating folks when you have a glitch in the technology we had it all up there pretty and nice right and now we're getting into a tech we're getting into the dreaded technical glitch i tried this a little bit earlier today and this tended to help out and that's to come over here and choose save scan query and by the way you don't need to do this i'm just trying to get this thing to reset and work correctly then i'm going to click on save here i'm going to say okay and we'll reload this this if this doesn't function for us just you'll have to trust me that 99 of the time it works correctly there's just a glitch going on here today for unknown reasons okay we won't be dependent okay so this is the this is not the exact this is actually a little bit of a derivation it's not the one that we have over here i think this is just looking at some stocks let's see if we can come back so we're so we're matched up oh boy such a pain such a pain okay so anyway investors i'm just going to ask you to trust me and believe me that when you do this you'll get a full list and you won't be dealing with this glitch one of the reasons i feel fairly confident saying that is you're going to load up this the search what we're doing here right now you're not going to have this archived one in there that for some reason is affecting the results here even though it's been changed it's been changed and saved and everything else you know but we'll we'll come we'll come over here and i'm going to sort this one over here let me just pull this up and let's see if we can sort our results here got this sorted like this and you know i i hate to do this but we're kind of because of the glitch we have here i'm going to go ahead and save this as a watch since i've saved it i have it sorted by percentage but i'm going to save it that way and bring it up as a watch this again technically you won't need to do this but where we have this glitch we're going to we're forced to do it here okay so i'm going to give this watch list a name and just and this this this is probably a good exercise because there may be instances where you may want to save it as a watch list although i would suggest that frequently what you'll do is you'll identify candidates and move those individual candidates over to watch this because all these are not going to be like like the perfect type of setup well the reality is none of them are going to be perfect okay but but a fair number we're going to be are going to meet the parameters when you look at and say yeah you know what that still looks a little bit a little bit dismal to me okay let's give it a name we'll go ahead and call it i'm going to call it aaa because that just helps me find it in the event i want to delete it at a later time i'll go aaa then um let's go trading trading trends and how about today's date 5 27 21 we'll save that now we'll just bring it up here's a watch list oh you know what isn't that weird now it's now it's working okay so different but at least we have to watch this though so that we can go to it strange right so let's come up here and go over here to charts and let's take a look at some of these and let's relate related to our moving averages here the 15 to 200 where price should be the distance between them getting getting wider and also the cross having occurred within 20 days spx it occurred quite some time ago we're looking for something that's a little bit more recent let's pull this stock right here this is one of the ones that yeah we're not going to trade that why does why does it meet the parameters well it meets the parameters because we looks like we had an acquisition a buyout or something like that but does it really represent a trade opportunity it doesn't look that great to me okay we'll play the part of the investor that it doesn't look that great to an investor because you have this huge gap settling down now it's in these types of situations not unusual just to see the stock flat line at some kind of an acquisition price or something like that let's move on here and take a look at adt so here we have adt you can see that we're just crossing right here we just started we just had a cross right here notice when that thing crossed what happened well the price did accelerate that's that that's that cascading effect kicking in as that 50 crosses the 200 notice right here this is a resistance level we're banging up we're banging up against it we get the cross right here and now we're flying now we're now we're moving across across it rapidly overall though is the trend that impressive well i see that the 50 is above the 200 but the 200 sloping down so some traders may look at this as a potential opportunity to get out at an early point and a new trend and it could very well be that but there would also be some traders were saying you know i'd like something a little bit more established you know i'm okay with the recent crossover but i still like something a little bit more established let's go on here and take a look at some of the other ones here that we have here then i'm just going to move down through here this one pki interesting interesting i'm just looking for something so this this one looks a little bit more um settled in and moving along here let's continue on here and very early cross right here okay i have a cross here you know what we're out two years this has kind of given us a dwarfed vision of things because we wanted to catch that spx let's move in and look at the last three months that's going to be more we want to look at from from an enter from an entry perspective let's come back over here and look at pki yeah so we can see the cross moving up here that's a nice trend to the upside that that's kicking in gear we actually have a pullback and a bounce now we have an earnings announcement out here why don't we look at this one as far as an example paper trade here we are here we are right here with our cross nice move a little bit of a pullback which isn't too unusual now we're kicking back into gear if we wanted to look at the trend we've got going on here it would be it would look something like this we use our trend tool on the thinkorswim platform oh boy that is not good is it let's try that again it looks like the color of our trend tool is black oh it's actually okay let me remove that i thought it was black because it sort of disappeared but let's try that again look at our trend going along these lines right here and coming along these lines right here so we have a stock that has recently crossed above the 200 period moving average pulled back and it's coming off the bottom side of this channel we're just talking about trading in the trend and possibly getting in an earlier point let's go out a little bit further let's zoom out some see what it looks like on a six-month chart a six-month charge you can see that we have some areas of resistance here previous areas of resistance that we that we broke down below okay actually previous areas of support that we broke down below are new areas of resistance so we come over here and let's catch this support level over here and see that's the resistance level we broke above that so our next resistance level is going to be that peak right there which is close to the top of the channel so let's play the part of the investor that's okay looking at this as a trend trade now there's some other factors that we could look at we could look at some of the underlying fundamentals notice the the price multiple up here is sitting at 12.86 it does pay a little bit of a dividend it's only paying out 2.4 percent 2.47 percent of their earnings for that small dividend which means they're putting a lot of their money back into the company which could accelerate price with regards to capital with regards to capital price growth moving up as the company acquires whatever you know it could require machinery it could require software computers whatever the nature of the business is doing we speaking of that let's just take a look at the nature of the business it's in okay to do that we can come up here to the analyze tab and we come down here to fundamentals and this is kind of interesting first of all we have what analysts are saying keep in mind that these analysts these these are third party folks okay so they're not they're not part of td ameritrade or anything like that they're third party and again not guaranteed with regards to accuracy or time they're they're not always right we have the research team assistance here to accumulate we have siffer sitting here four out of five stars we have the seats the street sitting here is a buy when you look at market edge right here keep in mind that this is based totally on technical analysis so if we've done our own technical analysis and we're comfortable with things we're going to be primarily focused on these three rather than this one right here of course it it you know if you're if your technical analysis agrees with market edge and there's nothing wrong with taking that into consideration looking at that that looks interesting if we want to look at the nature of the business what what do these folks do well their provider services and solutions for diagnostics life sciences applied markets then we could read the rest of this of what's going on then if we want to look at their fundamentals in more detail we could come in here we could look to see how their how their fundamentals are doing quarterly and annually and we could do if we could do a fundamental analysis with this now you know at the top when we began i i indicated to you that one of the things that that i like to do is i like to specialize in not only technical analysis but also fundamental analysis you know look for stocks that that are strong in both areas and in doing that one of the things that i often find is that the the technical analysis is a reflection of the fundamental analysis it's not always the case but usually if you have a stock that is that is broken into an uptrend is moving in an uptrend there is there is a tendency for there to be improving fundamentals with regards to that stock so they tend to move together you know one of the things that one of the things that i've often been that i've often heard is that you can never time the market well when they're when you when when when folks are saying you can never time to market they're usually making those statements in relationship to technicians or folks that use technical analysis but you know the reality is if you think about it because because fundamentals and technicals tend to move together fundamental folks that are going by the fundamentals a lot of times they're entering in at the same place a technician would perhaps they see a stock that has has has a has a low price relative to its book value or is currently trading at a low price multiple relative to where it's historically banned that fundamental situation represents value from a mental from a fundamental standpoint usually for stock to get in those areas the price has to move down okay so so you can use you can use the two together for if you look at it from if you look at it from the other side you look at it from a technician site a technician pure technician is saying hey i don't need to worry about the fundamentals and why is that because a fundamental a technician believes that everything related to the price the stock is already reflected in the chart and there's some justification for that if you look at the price of a stock it's a reflection of all the fundamentals that are out there all of the social media that's out there and everything is all baked into that price okay however some of the factors that that does affect the price we talked about cascading effect and those types of things where investors can perhaps become over zealot or maybe or maybe over a negative one term that's used is is irrational is a rational exuberance okay you want to keep in mind that those also affect the chart as well so i i like to keep i i like to basically keep a balance between the two i'm not suggesting that's the best thing for everything for everybody but when you look at technic when you look at technical analysis you look at fundamental analysis it's interesting to see how the two tend to be tied together okay so we'll go ahead and and look at it look at a trade here then on pke this is just a paper trade an example trade all right let's come back over here to the chart then i'm going to collapse our left hand side over here and we've got it an indicator down here that's average true range right there and what is the average true range telling us the average true range is giving us a measurement a rather scientific measurement of the of the range that the stock tends to trade in on a day by day basis between the highs and between the lows so when we're looking at this stock and we're looking for an entry and what we'll do is we'll look at this this is a trend trade so because this is a trend trade we're not going to put in a an exit at any kind of a target up here okay but we do want to define our risk down here we want to define what our risk is in the trade and as the trend continues we're okay moving our stop loss up or in other words you know the tool we're putting in here to to to uh to help to define our risk when we enter the trade we want to feel free to move that up in the event the stock continues to go up but with regards to a target we're okay taking this thing as high as it goes until there's an indication of a decrease in the trend and where does that indication of a decrease of a trend occur it first of all there's there's two things that can happen one is a stock can come down break down here and create a lower low when that breakdown occurs we have justification to exit the trade that would be one scenario the other scenario is this let's go back up here again okay the other scenario is we've come down here and we move up here and we come over at a lower high when that happens we have justification to get out of a trade we don't have to wait for it to come down here and make a lower low there's an old saying in investing buy low and sell high there's nothing wrong with selling right here as we're rolling over at a lower high because that case we're selling at a high point rather than coming down here and selling at a low point okay let's go ahead and draw a line here to represent our support level on this so we'll come over here and i'm just going to come down here that's looking at this last bounce place here at the bottom of the channel right there i want to identify that price point so i'm going to go here and say show that over to the right there it is right there 141.99 what's

our average true range our average true range is three dollars and 25 cents now i've been asked hey can when do you use 50 when do you use 80 when do you use one average true range well the as far as the answer as far as what percentage or what multiple the average to range to use that's going to be found in your trading journal for paper trades here i generally use 80 80 percent of the average true range but that's not necessarily the best you want to feel free to move around that one of the things you could look at is you can look at the volatility average to range itself you know over here we're up to a five okay and right now we're we're down here to three so it has had a history of being a little bit higher here than where it's currently at so from that standpoint you might want to go with 80 or you may or you may want to go with one and a half atrs okay but you can you just kind of take into consideration what's happened historically we're right in the range there and you can you can you can use that or you can just you can just stay consistent say hey i'm going to use i'm going to use 80 percent let's see where our stop would be on this then using eighty percent of the average true range which is three dollars and twenty five cents i'm going to multiply that by point eight to use eighty percent of that there's our support level 141.99 i want to come two dollars and sixty cents below that i'm going to find the difference between those two 141.99 and that means our stop is going to be where our stop is going to be at 1 39 39 we've got the balance we're currently we're currently trading above above the high of the low day right here if you wanted to use that we're also the bottom of the channel so let's identify then what our position size will be let's say on this on this particular position we're playing the part of the investor that's okay with two thousand dollars of risk so our stop loss is at 139.39 we're going to be entering in at about 145.75

let's find the difference between those two this is currently a negative number so i'm actually going to do plus here 145.75 so 6.36 is our risk per share if we're okay risking 2 000 bucks and we take 2 000 right here 2 000 divided by our 6.36

and we've got 314 shares i'm just going to round that to 300 shares in rounding it to 300 shares though we want to determine what our total investment would be because let's say we we don't want to invest more than say 10 percent in any one trade if we get 300 shares and we're paying 145.75 we're going to be we're going to be locking up 43 725. so if you're okay with that you know if you have if you have like a four or five hundred thousand dollar account that's going to be about ten percent right something something like that or it's right right in that area so we'll play the part of the investor that's okay with this total investment you do want to be careful about your total investment with regards to any one position they don't say put all your eggs in one basket just because you have a stop-loss here you want to be careful because stocks can gap bad news could come out what if these guys have some kind of a lawsuit filed against them for something or other or something like that you could have a huge gap to the downside so you do want to be cognizant because the stop is there to help you out but it's not guaranteed to trigger the at the particular price point you're looking at so with that then i'm going to do a right click on our chart here and we'll come down here we'll choose by custom with stop okay and we're going to go 300 shares here one two three i'm going to click on the little firecracker here that ties those together on our stop we want to make our stop good till cancelled i'm going to take the padlock off here so it's kind of floating around in there and then we want to go with our stop loss price was 139 dollars and 39 cents we'll hit the tab key on that we have everything locked in let's send it off confirm and i'm substituting here so i'm going to send this into my substituting account here which is holding center we'll send it in there you can review the order right here you can look at your investment forty three thousand seven thirty four stop and those type things that there are now this this is just buying and selling the stock so there may be some transaction costs in there but i'm seeing zero right here so always good idea to review those we'll go ahead and click on send it's often we got filled all right everybody well hey great so my my goal here today was to provide you with it with another tool talk about trend talk about the 50 and the 200 and how that can cause a cascading effect in other words energize the stock with regards to movement to the upside give you a tool where you can adjust that tool to identify certain certain time frames going back you can set that for one day ago you can set it for five days ago to identify stocks that have recently broken above that and also the other factors that we talked about here with trade with regards to trend also other things you can make an adjustment to with regards to that template that i sent out to you adjustments in price adjustments and volume all those things are meant to be adjustable for you okay so if you if you've got the link and you feel comfortable doing that then i feel like we've had a success we i feel like we've had a success here today if you like to contact me via twitter with regards to questions that's going on here i'll be honest with you i'm not able to answer all the questions on twitter but i'll do the best that i that i can okay so let's go ahead and wrap everything up here then for today investors i'll shift gears here just a little bit alrighty so what did what did we do here today well we talked about the definition of trends okay we talked about using a scan for for up trending stocks taking into consideration our definition of trends and we did a paper trade with regards to an example just a reminder hey if you like to follow me on twitter my twitter handle is at kroc underscore tda i also encourage you to follow michael on twitter he does for he does some great stuff over there you know i'm i'm primarily a technician if you wanted to get a good mix i know i do like to blend the two together but if you want to get a mix of another investor that i would say tends to large tends largely to be towards fundamentals and blends and blends technicians in from there then then then michael would be a great addition to your to your twitter folks folks that you follow by all means okay all right everybody so just a reminder that in order to demonstrate the functionality platform we need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely responsible for solely responsibility and just a reminder as well while this webcast does discuss technical analysis other approaches including fundamental analysis may assert different views everybody hope you have a great afternoon and evening best of success you're investing also just a reminder let's be careful and vigilant out there we're kind of getting to the whole end of the cove thing at least i feel like we are let's get on the other side of that as happy and healthy investors bye everybody thanks again and hope to see you next time we'll see you [Music] you

2021-05-31 04:43

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