BIG IDEA: YOU CAN’T LOOK INTO THE FUTURE
AND FIGURE OUT WHERE PRICE WILL GO.
BUT PROBABILITY, EARNINGS, DIVIDENDS,
AND OPTION PRICES CAN BE HELPFUL.
WORDS BY THOMAS PRESTON
What trader hasn’t
dreamed of having a copy of next year’s
newspaper today? Getting a peek at next
year’s market prices so you can buy below
that price and sell above it, then raking
in the money. That’s a fantasy, but although
we can’t see the future, maybe we can get
some hints about what the market is
cooking up. How? There are some tools
on the thinkorswim® platform from
TD Ameritrade that might help inform your
decisions about future trades. Let’s try to
unlock the mystery.
NOT A MAGIC TRICK
When you look at a stock’s price chart, the
current day’s data is usually on the right-hand
edge. Of course, there’s no way to fill in future
days with price data. But you can expand
the chart to the right to see future dates. The
chart can’t predict the future, but it can show
items such as earnings and dividends.
To do that, go to the Charts tab, click on the
Style button in the upper right-hand corner,
then scroll down and click on Settings. That
opens up the Chart Settings box (Figure 1).
From the tabs on the top of the Chart
Settings box, click on Time Axis. There you’ll
find the “Expansion Area: __ bars to the right”
control. This is the key to unlock the tools.
The number of bars you enter will be the
number of future days the chart will display.
You won’t see any price data, but it’ll give you
room to display other information like proba-
bility, earnings, dividends, and option prices.
In Figure 1, we’re setting the chart to show
the next 60 days. Now that you know where
the fun stuff is hidden, let’s put it to work.
THE COOL CONE
One popular way to use the expanded chart
is to review the possible theoretical range
FIGURE 1: Setting parameters for the expansion area. You won’t see any price
info, but you can opt to display other information such as probability, earnings,
dividends, and options prices. Source: thinkorswim® from TD Ameritrade. For illustrative purposes
FIGURE 2: Where might prices go? The probability cone gives you an idea of the
potential future upper and lower range of price. Source: thinkors wim® from TD Ameritrade. For
illustrative purposes only.
• SEASONED / TAKE AWAY: Three tools on your platform can help you glean something about the future.