Trading Futures | John McNichol | 5-24-21| Index Futures Review and Trade Setups
good morning everyone john mcnichol here and welcome to another fantastic week of education with td ameritrade i've been uh offline for the last two weeks but it's great to be back for trading futures we'll go ahead and we'll take a deep dive looking at the technicals on the index futures and we'll look for trade setups so stick around all right hey it's great to have everyone live here today such as vijay lee we have john charles robb see me diamond peter tm and everyone else we have ken rose helping out on the chat any questions i am unable to get to he'll be more than happy to help also thanks to those you listen in the archive session as well you can see my twitter handle on the screen at j mcnichol underscore tda if you wish to follow me and other fine instructors such as mr ken rose let's take care of disclosures folks and let's start the week together presentation is for educational purposes past performance of any security or strategy does not guarantee future results nor 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with other incoming market orders all right and uh here's our agenda we'll focus on the index futures on the technical review i'll be helpful for both you as well as myself since i have been offline but if you have followed me on twitter i was able to get a few charts out in between some of my military training and also observing my son john jump and graduate airborne school last week so a great time there let's go ahead and bring up the thinkorswim platform uh if you are new this session uh certainly welcome this class may be a little faster pace uh for those of you that are new to futures uh however uh not to worry uh if you uh go to our education tab and certainly stick around with us here but if you go to our education tab uh on the td ameritrade website or on thinkorswim and go to the webcast you can look at our webcast schedule on the webcast calendar tab and you'll see my good friend ken rose does teach a class uh on a little more on getting started but kind of more on a beginner level and uh help me can i believe that is on i can't go and put that through here we go it is on thursday at 12 p.m eastern time futures basics and beyond so a good complimentary class for you to view there all right let's go ahead and bring up the thinkorswim platform make sure we got everything going good here and uh thanks for the kind words roberto so if you haven't noticed uh futures are up today some of the driver may be with uh china trying to get commodities under control there but uh we can see from uh friday uh you know prices you know have been pushing up on some resistance there we seem to be pushing into that intraday range at this moment so we are seeing a potential test uh you know if we go back a little bit forward now we're looking at forward slash e s which represents the s p futures we can see from an intermediate to the longer term uh the channel in aspects and the still and overall upward trend if we go ahead and narrow down again focus on some more recent price action you know some technicians are you know keeping an eye at some of these previous levels notice as prices were making higher highs as well as higher lows but we saw that challenged over this last month as prices have broken down below some of the previous lows still attempting to hold that trend in this example i have a 55 day moving average representing that intermediate trend uh market still has been holding that and we're still not too far away uh from those previous highs however with last week's congestion you know looking at again transition you know are we still potentially making those lower highs and still some weakness for prices to go back and retest some of those lows or or have a reversal as we're seeing at the opening here things are more stronger now if we want to take a look more of an intraday view we can look at an intraday chart now particularly for those of you that are new this is an example of a grid chart where i have a daily chart on one side as an example and on this other side i have a five minute chart and if you go ahead and take a look over on the left hand margin here one you can see my twitter handle there also if you enjoy what you're listening here today this is part of the trader talks channel make sure you subscribe more importantly click like for this video and here is the code uh for the same chart that i'm looking at uh it's a case sensitive i was to copy that one can go ahead and go to the setup on the thinkorswim platform uh select open shared item and you can plug in that code again it is case sensitive otherwise it will not come up correctly so it allows me to paste it looks like i'm having a little bit of a lag here but let's try this again and we'll click preview and import and if you repeat uh those same steps now you should see a pop-up field that looks something like this and then from there uh you can feel free to make that your own by going to the grid on the chart you'll see a little box up at the top there you can click on that little drop down and there's a link for you to save that grid and you can customize and save grids from different time frames as we're doing here today all right and so with that let's uh take a look on this five minute chart you can right click and we'll maximize the chart i do have pivot points on the chart we'll may take a deeper dive on this one next week but these are actually representing both daily and weekly areas of support and resistance it's an indicator you can go ahead and add to the chart as we start off the week price action is above the daily pivots and uh this was actually doing this on friday as well uh was above both the daily pivot which some traders may consider as support as well as the weekly pivot just looking a little further out that's continued on into today as starting off the week we're above the weekly pivot and after being below it in the overnight session uh prices did consolidate and break above there and we're at that level now uh looking at the uh uh looking at some of the comments mentioned about uh on pivot points you know these are areas that active traders may look to trade uh where they can go ahead and you know trade bounces or breakouts you know of these support and resistance areas and possibly trade them to next levels or or possibly target some of those previous levels if we see a setup we may focus a little bit on that right now prices are coming up uh to a resistance uh based off of those pivots and it's uh you know not that these things uh work a hundred percent and as nothing is uh uh absolute uh but you can see some consolidation uh up at that level there what some traders may wait for a continuation uh of the move is if there is a break or possibly a retest of that pivot which may set for a continuation of some of those price moves and let's go ahead and zoom this out a little bit and you know a break above this area may look for at least from a shorter term you know target in that previous high notice as well uh that high from friday you know came in striking distance of a pivot point as well so these are tools that you know very active traders uh may potentially utilize so that's we're seeing with the s p now uh my symbol did switch to the micro version of the s p but the analysis is very similar uh for those of you that are familiar on the index futures if you click on the drop down and go to futures we're looking at in this case the micro which each tick is a buck 25 so if one's trading this each point is a five dollar multiplier you can also see the initial margin that's required for traders with smaller accounts uh you know this may be an area that some of those traders may focus on however keep in mind commissions can add up uh when you are trading something with a relatively small multiplier and relatively smaller moves uh whereas the larger contract uh forward slash es on the s p futures uh it is a 12 and 50 cents per tick or per quarter and that's a 50 multiplier so 10 times you can also see uh the uh the margin is reflected on that as well now this is a demo account your your results may uh vary there on some of these margins on uh they are updated based off of uh volatility in these contracts and you can see that the equity required for one contract on forward slash es is significantly higher in this case about 17 300. all right uh now you know other index contracts uh we looked at the s p futures uh let's look at the nasdaq uh that's forward slash nq as you can see nq right there and the uh the micro version of that is forward slash mq again you can see the multipliers and the margins here uh in the case of the uh uh the the multiplier for uh the nq it's a 20 multiplier for the nq and uh on the mnq i believe that is a two dollar multiplier okay so each point move would be represented by two dollars or twenty dollars respectively uh if i go ahead and let's take a look at the enqueue so you know with uh you know commodities or at least an attempt to get inflation under control uh growth stocks are going to have a tendency of benefiting uh in this case a lot in the nasdaq so we're seeing a a stronger move uh notice that the throughout the night uh prices closed in to the previous close getting above the daily pivot and even at the opening breaking above uh the uh one of the r levels resistance levels and again some traders may target you know a distance to that area as we're moving about halfway to that next pivot area now let's go ahead and take a look uh more from a daily perspective bigger perspective uh as i pull up on the dailies now we can see that tech you know has been struggling with the concerns of inflation you know really going back into march we can see that we did make new highs back in may but we've also seen quite a bit of a pullback as well again you know prices are still trying to make those higher lows uh although certainly violating uh in this example uh this 55-day moving average you know some traders may use something along the line of a 50-day uh i use an example of a 55 it's a fibonacci number and if you join me in some of my other technical classes i have a tendency to focus on some of the fibonacci series uh just based off of those averages being a bit more sideways in the case of the 50 50 55 day you know implies just kind of more of a range bound market shorter term prices are you know trying to make those higher lows and also break in above that recent shorter turn range and ken thanks for posting a lesson on pivot points from the archive as we look at the daily charts as well at least from a bullish case looking at some of these previous highs on the downward slide you know we do have a diagonal break and we're also seeing a potential horizontal break as well as the prices again attempting to trade up in that range but unlike the uh the s p uh not as much of a a a stronger trend there quite a bit of a back and forth and we can see that reflective on this daily chart looking at forward slash ym which is the dow mini futures again similar to the s p we've seen successful tests of that 55 day moving average the dow also was able to uh at least uh even though it violated some of those previous highs breaking down we're getting back above there with again that previous high need to be tested there uh around uh let's see that was may 10th uh looking at the more recent range over the the last couple of weeks we can see you know pushing up on that resistance right there so so far as far as the indices that we've looked at let's double check on the es you know only the dow the s p is coming close on breaking out of that range uh so nasdaq's a little short a correction the dow's a little short uh the nasdaq attempting to break out of that range and then finally the small caps forward slash rty bring that up and you know a lot of technicians and uh charters you know maybe looking at you know the russell as kind of a sign of you know true growth or you know true signs of strength and uh even worse than the uh nasdaq uh small caps have really been uh range bound here going back to february we're kind of holding around the mid range notice again with some of these averages in this case like the 55 day again going flat looking at it more recently you know just attempting to break out of a diagonal you know area of resistance there and then again looking at this more recent range over the last week you know i'll try and get a horizontal line here by the way i'm a creature of habit you know i have a tendency of always going up to the top here but there's usually about three or four different ways of doing things on this platform another quick and easy way of getting your drawing tools uh while you're uh on the platform if you have a mouse wheel uh your little mouse wheel if you just click on your mouse wheel press down on it your tools will actually appear right in front of you i got to try and recondition myself to do this because it is a little quicker and you know just selected a horizontal line and you know generally looking for you know that line of resistance there the other consideration too is on some of these big down days which i've tweeted uh long range days can act as areas of support and resistance in that midpoint i have to go back and bring up on my twitter feed one this was a view of the indices from friday on cash as we kind of highlighted you know those areas of resistance from friday and seeing an attempt to break out of them today but also from some previous sessions from the last week i think i was looking at let's see here she was right this area here um i believe this was on the uh the russell uh where gaps can act as resistance as well along with mid ranges of those long range candles i was trying to find example that long range candle and oh yeah this is it right here basically in the middle of that long range candle potentially acting as resistance that's at around the 41.50 mark and that was actually i think on the nasdaq actually which one was that here rgt yeah actually actually i was on the snp my apologies well i need to get my cup of coffee today i'm getting a little conflated with my indices today so that's actually what we're kind of pushing up right now on the spx at the moment all right so now we've got an overview on some of those indices and how we're setting up for the week you know the question is are we going to be breaking out of this range are we going to see things fall back and fade there and so let's go ahead and see what we have setting up intraday so this would be an example on a shorter term which some traders may refer to as a day trade now futures are not uh fall under the day trading rules that doesn't necessarily mean that one should day trade that's a personal decision based off of uh what level of uh risk you're willing to take and those transaction fees can add up so yeah as we look at the you know the s p you know the s p is uh attempting to settle in uh off of one of these uh pivot points you know some traders may look for a bounce off of that pivot point uh whether you enter as soon as it bounces or touches it or you know may look for a little confirmation of a candle reversal kind of like a hold on a five minute period except versus a daily okay notice in the chat diamond says likes using the fibonacci tool you know fibonacci can be another uh example of you know looking for some of those bounces as well uh you know for instance here on the es with this run-up here on the es from the pre-market from this low to this high some traders may go ahead and under their drawing tools select that fibonacci tool uh draw it since this is an upward trend you go with the trend going from the low to the high now we don't know if this is the high for this swing as we're seeing you know price trying to push higher but if there was any type of retracement or pullback uh some traders may be looking for a bounce off of some of these levels and in a lot of cases they may looking for a bounce off of that third or that 50 retracement and we're not seeing that at the moment now if i go ahead and take a look at some of the other ones see what they're setting up let's look at nq which did have a stronger opening we're seeing more of a pop right here you know possibly a little bit of a flag or a pennant there and again what some traders may be looking for is looking for a pullback and a bounce off of one of these pivot areas it looks like we have a little more of a room for that to occur and one of the things with a class like this particularly first thing on the monday uh even though i was trying to find a trade setup uh sometimes uh that trade may not come to you but we're gonna go ahead and look for one you know here's on the yms which is the uh the dow mini you'll notice interestingly the dow is actually still kind of in a a bit of a range here so if one was looking for the dow they may be identifying you know those areas of resistance as well as those areas of support and looking for a break out of this range one way or the other then let's go ahead and look at the russell forward slash rty looks like a little volatility on the russell after sinking uh at the opening uh did a little uh a little volatile there as it violated that pivot point which some traders may consider to be bearish and then went ahead and snapped right back above it again now this could have been a decent setup as far as entering uh you know on that five minute close as we got that bounce there but a little uh volatile move there as we go ahead and look at some of these ranges with these previous highs from friday and looking at this pivot point some traders may be looking for a break out of this range to see if there's going to be a continuation of uh of this move on the russell now in the meantime folks uh if you don't look at my archive and you want to learn more about pivot points uh one of the nice things again if you open up this shared chart these pivots are on there both the daily and the weekly if you go to the studies and edit studies when you go to your list of studies you'll see all these little question marks next to that so if i go ahead and bring up pivot and we take a look at pivot points there's a little question mark right next to if you go and click on that you'll get a background on what that indicator does the different lines you scroll down a little more there is a link for more details and that'll take you to our learning center which is all things think or swim there's a few variations of these pivots you can look at the question marks to learn more about that also google is a helpful tool but in the learning center under your education tab all things think or swim as well as with our studies library of the a to z which we have those pivot points being a part of let's just go ahead and double check i know ken's doing an excellent job of looking at the at the chat and everyone's questions there see if we got anything we can take a look at here do appreciate everyone's participation there uh it's good to be back sometimes when you're away for a little bit uh you're worried about those technical gremlins but uh looks like everything got on without a hitch here i think ken's got to most of everything there and yes uh yeah clicking on that center wheel to bring up the drawing tools uh is a uh a nice little feature there and uh it is interesting too yeah a lot of clients uh uh actually bring things up that we as instructors overlooked uh we've utilized this platform for quite a bit of time and sometimes uh we've uh forgotting or things that we've learned years ago on how functional this application is yep and uh ken's promoting we do have an evening workshop tonight on advanced options strategies with my good friend pat maloney teaching that tonight starting at five so you're welcome to go ahead and join him for that uh that's accessible at the td ameritrade education site via education and go ahead and select in-person events and you can learn about some advanced option strategies that now uh we also have done spreads in this class as well kind of more uh simple spreads some of them i guess maybe i can highlight a few of those since it's been a couple weeks of me being out of the saddle but if you go back and look at the archive uh we've done some spreads on on the indices for instance we did two spreads on the snp index uh one was uh for the third week of may uh which expired uh let's see when we initiated that uh that was a 42 65 70.
believe we had initiated that uh there it is oh these are yeah it's interesting oh i can't find it here i mean it's a little bit further back um i do have a actually this is it right here nope that's not it interesting oh no these these are actually when i opened them uh so actually uh yeah these are the ones that we actually opened this towards the end of april uh we had sold a buck 50 now you have to do the math on that that's going to be a buck 50 times 50 and these were three contracts so it's a buck 50 times uh fifty dollars times three uh so we actually realized uh uh max gain on this one as uh this was a a short call vertical that actually ken teaches i believe on wednesday i know we changed up our schedule recently and uh since the s p did expire below that short strike of 42.65 this one was a max gain we still have an end of the month spread where we had sold a 4270 so we just need the market to stay below 42.70 and if we go back to the chart i believe these are some strategies that ken may teach as well we basically just need to stay below those uh previous highs going in over this uh next week or so we may close it out a little bit before then another spread that we did was on gold and that one turned out positive i was considering going over a diagonal spread on gold today but a little bit on the pricey side from a standpoint of risk so i didn't want to do an example of that try and find something maybe a little more simpler but let me go and bring up forward slash gc this is an example that we had done a a put spread where we had sold a 1735 as gold was coming off support and went ahead and bought it back for 10 cents now this was uh this was in the second attempt because as you can see we did this previously in february uh where uh we were looking for a bottom and that didn't turn out as well that one turned out to be a loss um basically closed that one out for closer to a max loss but we're able to make a gain on that last example so one can practice doing some defined risk trades on futures just like you can do on options this is what we're looking at with uh forward slash gc on gold right now again if you look at the archive we do have a presentation on this and uh looks like gold is still going positive and having a little more of their day whereas bitcoin has been uh struggling there all right let's go ahead and take a look at one more attempt on a setup here as we're getting towards the end of our session here over next 10 minutes so let's see what we got all right so with the s p right here you know looks like uh from an example of a shooting star what some traders may be looking for is looking for that pullback and that subsequent bounce now again here's this fibonacci tool i can go ahead and extend this say activate this drawing here or maybe easier just to redraw it but this if this is a pullback here you know looking for a bounce whether off the pivot or kind of observing around this 50 61.8 retracement uh if a bounce comes close to this 50 percent retracement some traders may look for that entry uh at least target that previous high and then from a standpoint of risk position size with a risk down to that previous low but potentially close the position when it breaks and closes below that 61.8 so it's kind
of a way of giving ourselves an example of more room for a from a risk standpoint what some traders may do is they may anticipate a bounce by setting in a limit order if the price pulls back to that level so let me go ahead and actually do an example of that so not a an ideal condition uh usually like to be keeping a closer eye on it i just want to see if any of these other indices look a little bit different but want to at least get a practice trade in yeah we'll focus on the s p i'm going to do the example on forward slash es uh although if you want to practice on on the micro contract one can look at that as well so you know here's here's the pivot right here uh currently it's at 41 79.50 some traders may do is possibly set a limit within a tick or two of that pivot or if you want to use the fibonacci as a guide you know do it within a tick or two of that let's say i'll do it based off of the pivot and so i can right click on the chart could do a a buy custom with oco bracket another way of doing this is utilize the active trader tab right here at the top uh the a t i click on the a t and this is going to go ahead and bring up uh the active trader tab where you can actually bring up a template for a trigger with bracket and as we've shown you in the past if you tweak these by a certain number of points you can go ahead and save these as your own template usually as an example if if i'm doing an example uh you know on the s p or maybe one of the other indices you know may set start off with a bracket of about 20 points uh to give a wide range you know to make some adjustments notice once you start making those changes you got a little save mark here we can save that as a template and so once you click on that save and name it whatever you'd like i'm not going to do that since i have a few of these you click on the template drop back and you can go ahead and see here i got a 20 point bracket gtc if i go and click on that notice this is a bracket order with a limit order and a stop order to close out the position and that will be attached to any buy or sell order so i'm going to go ahead and pull this out a little bit i know it's a little truncated there but that's what we got to work with in just a moment here lost one thing on my side here make sure i can see the chat while i'm doing this too all right so um if we're going to go long we can click buy so we're looking for an example of a bounce um if we're going to go short on a bearish trade we can sell so i'm going to click on buy now the one thing to keep in mind there is an auto send for those that do not want a confirmation however uh in in our illustration we'll always look for a confirmation window to pop up so i'm going to click buy and i'm going to go ahead and go to edit so we can actually edit this order to a limit it defaults as a market so i'm going to go ahead and hit limit i'll leave this as a day order and again that pivot was at around 41.79.5 i'm going to go ahead and put it in for 4179.75 now some traders you know may observe you know pullback may not come back to that area they may look at some of these other pivot points and be a little aggressive and look for a candle bounce off of one of these areas but just want to at least give you an example of doing a [Applause] a limit order if the price pulls back to that area okay now you'll notice on the sell orders this is bracketed by about 20 points on each side they're both showing gtc now if i go ahead and send this i'm going to do this for one contract for illustrated purposes but i'll show you how to identify the risk i'll hit confirm and send and send you'll notice that the orders now are showing up on the screen i'm going to minimize this active trader so we can see that and as far as adjusting i can go ahead and adjust this down to in this case the previous high and in the case of the potential stop now keep in mind stops are not guaranteed to fill at a particular price uh once filled they will compete against with other orders i'll go and i'll put it at the previous low on where that fib was and i'll click send now theoretically the risk in this trade will be from that limit order down to the stop and we can do the math on this if we're looking at 41 41 79.75
and the stop is at about uh 41 68 here i'll just go ahead and circle that better penmanship um looks like that's a difference of about what we got eight nine about nine and a half points approximately so nine and a half points times the multiplier in this case it's a fifty dollar multiplier so nine and a half points times switch this out bring up the calculator so 9.5 times 50 that's 475 dollars per contract okay that's assuming that you get stopped out at that level now that could account for some slippage now theoretically the potential exit would be if there's a close below this 61.8 so what one can do is if it breaks down below 61.8 uh on a closing bar you know one can go ahead and adjust that stop to that low and if it bounces great if not then one would be stopped out and thereby reducing the risk okay so this is just one way of potentially doing uh you know a setup like this in this case on a fibonacci and uh we'll see if this plays out and triggers and uh we'll uh potentially follow up with this next week all right so let's go ahead and highlight a couple of things one let's make sure i can bring this up i'm a little trouble with my mouse here get back on track come on so i got a little trouble with my drawing tool here so get embarrassed with one sec all right there we go so one keep in mind that futures are not for everyone we're going to encourage you to practice trade what you learn here today you know in the case of the s p futures on the forward slash es does require a bit of capital uh to trade whereas the micro contracts uh not as much so make sure you do your due diligence also if you take a look on my scratch pad here www.td ameritrade.com
forward slash futures is a great resource for you to continue to learn about the futures market trade dot com forward slash futures shows you how to start trading so if you did want to sign up for futures you know here would be the list list of education and resources and also some of the available products that we've hired uh have have uh gone over in our sessions as well as with ken's and you can see a lot of those listed here we focused on some of those indicee contracts such as the forward slash es for our practice trade again there's the russell there's a nasdaq there's the dow and some of these do have micro contracts as well uh that may be available for trading as well and one one other thing uh you know that looks like the micro uh contract is available for trading as well i think ken has highlighted that in his contract that may be something we'll highlight at a future time as we familiarize ourselves with that okay so hopefully you learned something new today folks we did an index future a technical review uh we did a trade setup there uh to uh and we'll see if that actually plays out i do appreciate ken helping us out on the chat and more importantly you for joining us each and every week so if you loved what you learned here today make sure you click like it doesn't look like there's a survey oh there is a survey ken thanks for bringing that up so please click on that survey uh provide your feedback and another way for you to provide that feedback is to click like particularly for those who listen in the archive session as well and remember folks in order to demonstrate the functionality of the platform we did have to look at actual symbols keep in mind t ameritrade does not make recommendations or term suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility all right folks have a great day it's great to be back and keep an eye on my schedule to see what else i got going on this week we'll see you then bye now [Music] [Music] you