Finding stocks on sideways trend

[8Nick8]

Hi all, i am learning to trade options by selling cash secured puts to collect premiums. May i know how to customise a scanner to scan for stocks that are on sideways trend for at least 30days? Or any recommendations that can generate a list stocks with good premiums to sell puts are welcomed.

Thank you

 

[BenTen]

Hey @Nick

I'm happy to see this thread. Me and you both

First, let's define "sideways trend for at least 30 days".

 

[8Nick8]

Hi @BenTen, thank you for responding to my question.

With my little knowledge and my definition of sideways trend, i am looking at the price movement in a consolidation pattern, 30 days is arbitrary number, as i presumed that is where the trend has stabilised. I hope to use a scan to find such setup with good premiums and IV

So my plan is to find good stocks that i am prepared to own, then sell puts when price comes close to bottom channel to collect premium and if i am assigned, i will do covered call.

Thank you once again for helping me.

 

[BenTen]

@Nick Check out some of the links below:

• https://usethinkscript.com/threads/...nkorswim-avoid-trading-in-choppy-markets.419/
• https://usethinkscript.com/threads/eci-gaussian-indicator-for-thinkorswim.1160/
• https://usethinkscript.com/threads/...dicator-for-thinkorswim.103/page-2#post-10280

While we're looking to do the same, meaning selling puts to collect premium, my method is different from yours. Here is my take on it.

Since I'm writing puts, my bias is bullish. The first step I did was putting together a watchlist with stocks that I'm willing to hold for the long term. You can check out my watchlist here.

After that, I use the Buy the Dip indicator to look for stocks that are selling off, BTD signal line crossing below 0, and then I will start to look for levels that I'm comfortable holding long term. Once I identify the price level, I will sell puts there and collect the premium. If I get assigned, I know that the stock is already undervalued and that I wouldn't mind holding anyways. Selling covered calls on assignment would be the next step forward

I hope that helps.

 

[8Nick8]

@BenTen Thank you for your sharing. Very clear on the guidance, with a watchlist that we are familiar and with strong trending stocks, we have higher probability of success for the options to expire worthless.

When BTD signal crosses the 0 line, do u use any indicator to determine the Price level or how do u decide how far should your sell Strike be away from the current price?

May I know if you have a scanner for your watchlist? What criteria do you use to select them?

Thanks

 

[BenTen]

@Nick I tend to go really far out of the money. I pick my strike based on my support levels, where I'm comfortable with getting assigned. I don't really use any scanner because I have my own dedicated watchlist already.

 

[8Nick8]

Two last questions, may I know what is your DTE u choose, at least 30days or 45? what is the best time frame used to get the BTD entry signal?

Thank you.

 

[BenTen]

@Nick DTE may vary depending on what I'm looking at. I'm still experimenting with different expiration dates. When swing trading, you should be looking at multiple higher timeframes such as Weekly, Daily, and 1HR.

 

[desiben]

@BenTen Which indicator would paint like this for sidewise consolidation?.

 

[BenTen]

@desiben Try this: https://usethinkscript.com/threads/...nkorswim-avoid-trading-in-choppy-markets.419/

 

[dhiltonnj]

Hey folks, great community you've got here. Thanks for letting me poke around. So I can find really good entries and exits in a directional market. That's awesome!!! Less awesome, I give back too much trading when the market moves to sideways.

I've been looking at charts for weeks to try to determine when the market will shift from trend to sideways. ADX and its many variants just don't show me this. Possible, I'm using ADX wrongly, there's a better tool, there isn't a tool to predict when market mode shifts from trend to sideways.

What do you use to identify these types of shifts in the market mode?

Thanks and amazing trading to all.

Maybe after a few weeks of looking and finally asking I might have answered my own question. Maybe imp crazy but I added a study, ADXR. I looked back and its behavior after setting the ADXR to (wilders, 9). It seems to me that is about to or does cross the purple line we will have a stronger trend. Ill need to experiment with this and not sleep again tonight. IF you have any insight that imp right or wrong id love to hear it.

 

[pkcfc]

@dhiltonnj I, like you have been doing quite a bit of research on finding an indicator to help get out of the chop. Obviously I've come to the conclusion that nothing is perfect, and I've noticed ADX just lags way to much, the CHOP Index Indicator has too much noise in itself and it isn't effective for day trading as much as it probably is for longer term trading (in my opinion). Having said that, I think ADXR is actually pretty solid if modified to your liking. So Thanks for this

 

[MatthewTherrien]

What would be a good indicator to say "Do Not Trade" - I use Ichimoku when prices are in Kumo & Alligator when the Alligator is sleeping as my Do Not Trade indicators

Any better suggestions?

Thanks

 

[rad14733]

What would be a good indicator to say "Do Not Trade" - I use Ichimoku when prices are in Kumo & Alligator when the Alligator is sleeping as my Do Not Trade indicators

Any better suggestions?

Thanks

TTM_Squeeze comes to mind as it is intended to show when a symbol is under consolidation and when it breaks out of consolidation... You can also use the search feature and look for "chop" as there are indicators that signal choppy price ranges, similar to what TTM_Squeeze does but in different ways...

 

[MatthewTherrien]

TTM_Squeeze comes to mind as it is intended to show when a symbol is under consolidation and when it breaks out of consolidation... You can also use the search feature and look for "chop" as there are indicators that signal choppy price ranges, similar to what TTM_Squeeze does but in different ways...

Thank you for that suggestion

 

[MatthewTherrien]

I also found the Choppiness Index coded by Mobius which seems to do what I want

 

[XeoNoX]

The more popular choices are TTM squeeze or shorter (fast) length moving averages when they are close together. Personally i use the moving averages over TTM squeeze. To search for that setup you can use X MovAvg is within Y MovAvg past ABC bars, i beleive those scans are somewhere on the forum already.

 

[MatthewTherrien]

The more popular choices are TTM squeeze or shorter (fast) length moving averages when they are close together. Personally i use the moving averages over TTM squeeze. To search for that setup you can use X MovAvg is within Y MovAvg past ABC bars, i beleive those scans are somewhere on the forum already.

Thank you - I appreciate your comments - and I confirm that I am getting good signals from the Choppiness Index to keep me out of trades - http://tos.mx/0a7Lonz

 

[joe362]

@BenTen
I just wonder do we have any indicator to scan all the stock go straight for 5 day or more ? (the price doesn't change too much in 5 days )
I have an example below, Can you help me out?
Thanks

 

[MerryDay]

@joe362 The issue is "the price doesn't change too much in 5 days" needs an exact definition so it can be translated into a mathematical expression. You need to either be able to say that mathematically or try to ask for modifications in one of the many sideways threads that @BenTen provided in post #4 of this thread,
HTH