Simulated Trades and Risk Profile

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Video Transcript:

Hello traders, welcome to the thinkorswim tutorial and the fifth module Analyze tab. Today we’re going to look at the Simulated Trades and Risk Profile sub tabs.

Now right here you can see that we are on the Analyze tab and the Add Simulated Trade sub tab, and we are looking at the E-Mini S&P 500 futures contract. You can changed these to any instrument you want and it’ll change all the information of the instrument in the Add Simulated tab. We are going to do this demonstration with a crude oil trade. From active only to three months and all. We are going to choose active only, and we are going to add a simulated trade.

Simulated Trades TOS

Now to add a simulated trade you can see that you have the market data right here. You have the expiration contract, the last traded price, then the change for the day, the bid they ask, etc. Now if you want to add or buy a simulated trade, you have to click on the ask side of the market and if you want to add a sales simulated trade you have to click on the bid side of the market. We are going to simulate a buy trade of five contracts on the crude oil futures. So we click on the ask side of the market, and as you can see right here we have a simulated position or simulated order of one contract on the buy side on futures at $44.44.

Now you can change everything to simulate your trade. So what we are going to do right now is we’re going to change the value of the trade to five contracts by going up on these blue arrows. And you can use also this drop down menu for the default values. Then we are going to enter a entry price, and let’s say that we want to watch it from $44.55. What will happen? So we type in $44.55, we click enter, and right here if you unlock the lock the price will go back to the market or to the actual market price. But if you lock it, you can choose the actual market or the actual price you want to enter the simulated trade at.

So we said we wanted to watch what would happen if we buy five contracts on future on the light crude oil futures at $44.55, okay? Now we already have this position and simulated trades completely set. Now you can also analyze open positions or already sent orders by clicking here on show all, but because we are only going to analyze a simulated position for this lesson, we are going to hide our positions. Then we have to look at these price slices. You can see that by default we have a 10% offset to the upside and a 10% offset to the downside. Now, because we are day traders we want to analyze a 1.25% move to the upside and a 1.25% move to the downside, okay? We can also change to a default setting of percent moves by clicking on this drop down menu.

Now, as you can see we have the possible profit and loss for our 1.25% move to the upside and a possible profit and loss for a 1.25% move to the downside. As well as an open P&L for the current market price because we have entered at $44.55. Remember that we are not looking to analyze this straight from a market or current market price structure. Now, you can add slices by clicking on this plus sign, and it’s important to add price slices because you don’t only want to be analyzing one offset to each side of the market. You want to analyze multiple possible moves in the market.

Simulated trades and risk profile

Right here you can see that we have a dollar sign, if we click on the dollar sign we go back to a percentage based move. But we also want to analyze a possible move in points, okay? Let’s say that we want to see what would happen if the price on crude oil moves up $1.10 or 1.1 points, and if it moves down or against us 85 ticks, okay? Now you have here the possible P&Ls; for a move of $1.10 and a move against us of 85 ticks. Now this is how you add a simulated trade to the Analyze tab, and as you can see we are on the Risk Profile sub tab of the Analyze tab on the thinkorswim platform.

If you hover you mouse over the center of this chart you can see that you have a zero P&L price. It doesn’t move from our entry price of $44.55 that we have set here. Now these red lines are linked directly to the price slices. If you can see right here we have the offset moves of crude oil that we chose to analyze. Right here we have the move of 1.25%, the move of $1.25, a negative move of zero because now the market price is $44.38. A negative move of 85 ticks, and a negative move of 1.25% from our entry price right here. You can choose to move these price slices with your mouse just by hovering over it and then click on it and holding your mouse. Now, you can see that our entry price is $44.55, but if we unlock it right now we have the analysis of our open position of five crude oil contracts from the current market price.


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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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