TD Ameritrade’s thinkorswim one-click Active Trader feature is designed to help you make your options trades quickly. In Options 101 we’ve shared how options are contractual agreements between the buyer and the seller. An option contract is an agreement between two parties to facilitate a possible transaction.
Active trading is a strategy that involves ‘beating the market’ through identifying and timing profitable trades, often for short holding periods.
4 Ways to Accomplish an Active Trader Strategy
- Day trading involves opening and closing positions within the same trading day and is among the most exciting strategies.
- Position trading requires investors to hold securities slightly longer, requiring patience as the trade develops.
- Swing trading relies heavily on technical analysis to identify when to enter and exit a position.
- Scalping takes advantage of pricing discrepancies, though it often requires larger amounts of upfront capital to make larger profit.
Traders using any of these strategies can benefit from the thinkorswim Active Trader interface, which offers a handy bid/ask price ladder, one-click order entering, and high-level optimization for options trading.
Here is a lesson on how to use active trader for options trading.
Locate Active Trader in the Trade Tab
The default interfaces will show two gadgets when opened: Chart, Active Trader, and the Control Bar.
The Chart gadget is a miniature version of the Charts interface. Charting lets you see the daily price and volume of a selected stock option over a specified period. In chart settings , you can customize the appearance and functionality of your chart in a number of ways.
4 Ways to Customize TOS
- Chart Type: Allows you to choose how the chart is drawn. Choose from Candlestick, Line, Mountain, OHLC (Open, High, Low, and Close), or Point and Figure.
- Pricing Axis: Choose a linear or logarithmic price scale for your Y-axis.
- Active Trader consists of Big Buttons and the Active Trader Ladder.
- Control Bar is located on the right side of the Active Trader panel containing several tabs. Although you may not really need them, you should take some time to try each one—news screen, Level 2 quotes, dashboard, charts, time, and sales—displaying a set of order buttons between the chart and other market boxes or above your chart.
Get to Know the Big Buttons
Buy MKT and Sell MKT: Near the top of Active Trader, you will see these big buttons by default. Buy MKT is the market order to buy at the current Ask Price, and Sell MKT is the market order to sell at the current Bid Price.
Note: Active Trader can be customized. See The Best thinkorswim Chart Setup for Success.
Join the Bid: Clicking this button will have Active Trader issue a limit order to buy at the current bid price. Another way to state “Joining the bid” is by saying I’m going to wait with everyone else in line for someone to sell me their shares at $X price. You’re “joining” these traders in waiting for a seller to come along, this is why you’re not filled right away.
Join the Ask: Clicking this button will have Active Trader issue a limit order to sell at the current ask price. The ask price is the current lowest price at which someone is willing to sell one or more units. The ask price will always be higher than the bid price because any ask price at or below the current bid price will just automatically fill existing bid orders until the lowest ask is once again above the highest bid.
Quantity: the number of contracts in your Active Trader orders.
Auto Send: You can skip order confirmation and send your order directly to the market. Avoid using this auto-send unless you are sure about the order.
Enter a Stop/Limit OrderAdjust the quantity in the Big Buttons panel. Hover the mouse over the Bid Size or Ask Size column in the Active Trader ladder. You will see a bubble in the Buy Orders or Sell Orders column, for example, BUY +1 STOP. BubblesWhen you add a working order in Active Trader, it is displayed as a bubble in the ladder. The bubble indicates the trade direction, quantity, and order type. The bubble’s location determines the price level the order will be entered. Dragging the bubble along the ladder will change the price, so when you drag-and-drop, you will see another order confirmation dialog (unless the Auto send option is enabled. As stated earlier, avoid using Auto Send until you are sure about your order.Once your order is confirmed, the bubble will take its new place, and the order will start working with the new price.
Click at the Desired Price Level In the Bid Size column, clicking above the current price will add a buy stop order; clicking below or at the market price, a buy limit order.In the Ask Size column, clicking below the current market price will add a sell stop order, and clicking above or at the market price, a sell limit order.P/L OpenThe Profit and Loss Open feature sits to the right of the active trader ladder. Each tick corresponds to a gain or loss based on how many contracts you are trading. Profit is displayed in green, and loss is shown in red.
- Proceed with the order confirmation.You can just click ‘x’ in its bubble to cancel an order.
Keep Learning and Practicing
The above lesson shows you how to use thinkorswim Active Trader for options. thinkorswim’s OnDemand platform is a great way to practice the intricacies of Active Trader.
Choosing the Right Order Type
Unfortunately, there are no straightforward rules for navigating the bid/ask spread and choosing the right order type in Active Trader.
Only through hands-on experience do day traders gradually develop an intuitive sense of the best way to execute their trading strategies using different order types and minimizing their exposure to the bid/ask spread.
However, with these fundamental concepts in mind, you are now well on your way to learning how to manage the different bid/ask spreads that you will encounter in the market.
For More Personal Guidance …
I have a team of profitable day trader coaches who are available to assist you in learning how to implement the thinkorswim Active Trader’s features alongside a proven winning strategy. We are here to help you become a profitable day trader and realize the profit potential you desire.
Furthermore, many of the people I have helped reach their full potential in becoming financially free started by watching this free 1-hour webinar.
Also download a ( FREE E-BOOK ) by Maurice Kenny DAY TRADE LIKE A MILLIONAIRE.
