Getting Started with Technical Analysis | Lesson 2

Good morning and welcome this morning to Getting Started with Technical Analysis. My name is Ben Watson. I'm an education coach and senior manager here at Charles Schwab. And I'm joined out there in the chat by my good friend, Brent Moors, who's going to be helping me out. He's a 20 plus year veteran of the financial markets. He's there to help answer your questions along the way in the chat. Thanks to all of you who are joining us in the live version today. And those of you that are joining us in the recorded version, thank you for being here as well. and comments in the comment section below. And as we get started today, this is the second of a nine-part series of getting started with technical analysis.

We're going to talk a little bit today about trend and moving averages and how we might use those to help us to understand directional price movement when it comes to stocks, and ultimately other strategies that we might use. So that's where our focus is going to be today. We've got lots of great resources, we've got lots of great discussions, so let's get into this discussion right now. We've got a couple of quick housekeeping items we need to take care of, and then we will jump right into our content. Remember that everything we talk about today is simply for illustrative and educational purposes only. It is not a recommendation of any particular security or strategy or technique.

Remember, if we talk about options, which we won't in this discussion, but I want to make sure that we're covering this, that options carry a high level of risk. They're not suitable for all investors. Make sure that you're aware of the characteristics and risks of standardized options before considering any. option strategy. Any specific symbols that we use in this discussion today are simply for illustrative and educational purposes only. They are not recommendations. They are selected randomly to illustrate particular components of our discussion today. Now, this is a focus on technical analysis. There are other ways to look at the market, fundamental analysis, probability analysis, and many others. All of those are theoretical in nature. None of those are guarantees as to what's going to happen next.

And Schwab doesn't recommend the use of technical analysis or really any other single method of analyzing the market as a sole means of investment research. Now, we're going to be focusing on using the Thinkorswim desktop software platform today, specifically the paper money version of that platform. And that is a great sandbox to learn in. It is not, however, a guarantee of future success out there in the real world. Remember that investing involves risk, including loss of principle and past performance, no guarantee of future results. Although when we talk about past performance, we're kind of getting to the heart of what a trend really does mean. So let's talk a little bit about that and kind of look at where we are in this context.

Remember, I mentioned this is number two of nine in our discussion of technical analysis and getting started. This replicates some of the content that you will see in our live workshop. Talk about technical analysis and option strategies over two days. But you can see that last week we talked about an introduction to technical analysis. Today, we're going to talk a little bit about trend and moving average. Next week, we're going to talk about support and resistance. Then, following that, candlesticks, price patterns, and so on. And you can see that path. And I'll show you where to find these archives and the recordings from these webcasts as well along the way as we get into this discussion. But I mentioned that two-day workshop. And we've got a couple of them coming up, including another type of event.

So coming up in Chicago, August 15th and 16th. In Schaumburg, we've got a two-day technical analysis and option strategies workshop. And then coming up in September, early September in Washington, D . C., we've got a two-day workshop, Technical Analysis and Option Strategies. The Friday of that workshop is Technical Analysis. The Saturday of those workshops, that's Option Strategies. And then our Dallas Market Drive is coming up September 20th in Dallas. That is a market drive, and that is a one-day event, macro to actionable items. So let's talk a little bit about kind of the structure and the idea. We touched on some of these ideas last week in terms of trend and timeframe. Now we're going to bring into this mix the idea of moving averages as well.

And we're going to look at some examples along the way. So let's kind of talk through trend, right? We know, and we talked about this last week, the idea that price tends to move in a trending fashion. And that trending fashion can either be up, down or sideways. And that's based on really kind of the efforts of buyers or sellers, right? If there are lots of buyers present, they're pushing price up. If there are lots of sellers present, they're pushing price down. If there's roughly some equilibrium, they're kind of keeping that price the same within a particular range, you might see some sideways movement. Now, this assumes really one thing, and that is that the market understands everything that's out there, all the news that's currently available, accounts for in determining that trend.

So if we see a trend moving in a particular direction, that assumes that buyers are in control, they're pushing prices higher, and that they are anticipating that that price is going to continue to go up. And if we see a trend moving down, we assume that sellers are in control, they know everything that's going on, and we assume that they are pushing that price down in anticipation of price moving even lower. This idea, right? The idea that a trend happens when there is a change or really are reflective of supply and demand, right? Supply is the number of shares available. Demand is the number of buyers for shares at a particular price. And an uptrend reflects strong demand. And we see that that demand is exceeding supply, right? And price goes higher.

And a downtrend reflects excessive supply or lots of sellers present. And that price pushes until buyers step in and they decide to buy at a particular level. They feel comfortable buying at that level. So, the changes in trend happen where there is a change in who's in control, the buyers or the sellers. We're going to talk more about that when we get into levels of support and resistance. But this kind of gives us an idea of that idea, kind of that concept. Of. Who's driving the trend? So, when we talk about trend identification. One of the things that we look for is the patterns that get created. And we'll talk more in later sessions about specific types of patterns. But we see some repeatable patterns here or some patterns that tend to repeat themselves. High demand generally comes with strong momentum. High supply comes with strong momentum in the other direction.

Fires tends to indicate that we don't have a lot of momentum, right? So we get this kind of pattern where the trend is not moving in a straight line. We may get a rally up and a little bit of a pullback and a rally up and a pullback and a rally up and a pullback. That creates some easily identifiable points for us as Technical analysts, right? Because if we have that idea that price doesn't move in a straight line and it doesn't move straight up and it doesn't move straight down, nor does it necessarily move at an angle in a straight line without making these rallies and pullbacks, that gives us the ability to look for those points, those turning points to help us to identify a trend, right?

And higher lows. They don't need to necessarily be consecutive. We're just looking for those major turning points. And when we see that price moving in that type of pattern, like this, where we see those green dots reflecting those highs and lows, and those highs and lows are continuing to get higher, it's really an expression of the fact that traders or investors are expecting price to continue to move higher, and they profit by buying that stock. That is one of the reasons why investors and traders buy shares of stock. Other reasons might be to gain dividends, to gain voting rights, but those aren't necessarily guaranteed, can change. But the general reason that buyers buy is to take advantage of price appreciation. The price of the stock goes higher over time.

We might consider this last statement that says the uptrend is considered broken when price dips below the prior low. So we're going to look at some examples of that here in just a minute. Now we're going to talk about a downtrend identification really quick. A downtrend is often described as a bearish trend, right? Bearish price movement, lower highs and lower lows. So if an uptrend is higher highs and higher lows, a downtrend is lower highs and lower lows. And the expectation for traders might be they stay out of a trade or they short the stock or they push the price down or they use options perhaps as a means to take advantage of that downward movement. Above one of those previous prior lower highs and now creates a new higher high.

So now we're back into an uptrend. So we'll talk about those trend change points here in just a minute as well. But a sideways trend, the last that we're going to talk about here is really identified by roughly equal highs and lows. And they, again, don't have to be consecutive and they don't have to be exact. We're talking about roughly equal highs and lows. So as the price moves sideways within the context of that trend, and we talked quite a bit about this week in this discussion. But within the context of this sideways trend, we can see that we've got uptrends and downtrends of shorter timeframes that then make up that sideways trend over time. So those are kind of the ideas that we want to think about.

So what I'm going to do is I'm going to pop out here to the Thinkorswim desktop software platform. And we're going to pop into a particular stock. And I'm going to take this indicator, this implied volatility indicator off of this particular chart. This is Hershey's. And I chose this particular stock because, for no other reason than it demonstrates a couple of different trends within the time frame that we're looking at here on the chart. So this is a one-year daily chart. Each one of those candlesticks that's displaying open, close, high, low information is telling us what's going on on an individual day.

majority of this time frame, this one year time frame, has been going roughly sideways. Because it's been making roughly equal [pause]. And if we look at the kind of the latter two-thirds of this time frame, it's been making roughly equal highs and lows. That is, it's been in that sideways trend. But within that context, there's also been a series of downtrends and uptrends. So let's look at a downtrend first, just because that's, I think, the largest one here on this particular chart. That is identifiable. So as we look at this particular downtrend, I'm going to zoom in on a time frame. I'm going to zoom in from the bottom of really kind of the middle of February back here into kind of the early part of September in that time frame.

And I'm going to grab my magic marker here, and we're going to use the magic marker to kind of identify some of these points that would help us to see a downtrend. So here's a high, and here's a low, and then here's a lower high, and here's a lower low, and here's a lower high, kind of right in that area, and here's a lower low, and here's a lower high, and here's a lower low, and here's a lower high, and here's a lower low, and here's a lower high, and a lower low, and then we have a slightly higher high, but we have another equal or lower low, downtrend in this particular case. And then it kind of goes sideways. We kind of see this equal high and some equal lows across here.

Then we see this big candle that came about, and that was probably tariff notifications and early kind of rattling about tariffs that impacted the chocolate market and the cocoa market. And then we see that kind of bleeding off back again into that downtrend. And so we see equal lows, and then those lows begin to be lower lows and lower highs and lower lows and lower highs. And overall, that becomes a downtrend. And that downtrend is identifiable by looking at those lows and highs. I drew those highs and lows in there discretionarily, right? And I've been looking at these types of charts for the last 20 years plus, right? So it's easy for me because I've seen thousands and thousands of charts. It's easy for me to see where those highs and lows are.

For you, if you are just starting out, it may be a little bit more difficult for you to see that relationship between a high and a low, but you've got to keep that in mind. It is a relationship. So this is a relational pattern, right? In order for us to have a low that is lower than a previous low, we've got to understand where the previous low is. We've got to understand where the previous high is, right? Likewise, with an uptrend, because if we were to take that annotation off of there and we were to zoom out in our time frame, right? And we now go to this time frame here from the end of February on up into kind of middle March. Now we have an uptrend, right?

So we have a low, we have a high, and we have a low, and we have another high, and we have a low, higher low, and we have a higher high, and we have a higher high, and a lower low, and a higher high, and in fact a higher low. Now it's not until we get to that point here where that higher low gets broken, and now we make a lower, low and a lower high and a lower low that that trend changes. So it's this point right here where the trend changes. But when it's in that series of higher highs and higher lows, it is in an uptrend, albeit for a shorter period of time. So that's a shorter term uptrend.

Now, if we take those off, We close those annotations and we come back out here and let's zoom back out one more time. I'm going to zoom into this timeframe right here. And this timeframe is really from that February timeframe on into where we are currently. One of the things you notice, we'll grab our magic marker to do this one more time. So here's a high and here's a low. And then we kind of get down into this timeframe, right? There's a high and there's a high and there's a high, or excuse me, there's a low and there's a low and there's a high and there's a low and there's a high and there's a low and there's a high and there's a low and there's a high.

And now there's a high right there. Generally, a sideways trend. Not ideally so, but it is generally a sideways trend. And so that can help us to kind of look for and identify those periods of time. Now, here's the thing to think about. This is a one-day chart, right? And one of the great things, and we've talked a little bit about this with technical analysis, is that technical analysis and the components of technical analysis are portable or fungible across different timeframes. This is a one-year daily chart. Let's change this chart really quickly and change the timeframe of this chart to a longer-term chart. Let's go out, say, for instance, to a three-year weekly chart. In a three-year weekly chart, now each one of these candles represents one week of trading.

I can see within the context of this three-year weekly chart that there was a downtrend. Here was a little bit of an uptrend right in this timeframe. Here was a sideways trend. Here was a downtrend. And once again, we can identify those longer-term trends within the context of this longer-term information. Each one of these candles represents a week. That means each one of those candles has a lot of information, right? Okay, so now let's pop back down to a shorter time frame for some of you who might be interested or might already be looking at intraday charts. A timeframe shorter than a one-day period in your candlestick, right? So I'm going to go to a five-day, five-minute chart. And what do you happen to notice right off the bat as I look at this particular chart?

This is five days, the last five trading days, and each one of these candles now represents five minutes of trading. So what's been happening with Hershey's over the course of this last five-day, five-minute time frame? Well, let's use our magic marker, and let's see what's going on. There's a high, and there's a low, and there's a low, and there's a high, which is a lower high or roughly equal high. So we had a little bit of a downtrend. And then we had a high and a low, and we had a high and a low, and a higher high and a higher low, and a roughly equal set of highs and roughly equal set of lows; uptrend. And then we had a big high there and a higher low and another higher high and a higher low.

So overall, over the course of the last five days on this stock, we have a short-term or very short-term, in this case, uptrend, right, making higher highs and higher lows. And so now that we have that understanding, we can see kind of that fungibility across different timeframes. And we're familiar with identifying those highs and lows. And we just simply took our magic marker and I drew across those highs and lows. I can help to identify those trends. And that can be something that is, you know, kind of a useful practice skill. Right. I'm going to take this back to a one year daily chart. Right. And let's put this on here. And you know what I'm going to do? I'm going to bring up S.

So if I were looking at this, the market, this is the S&P index. I now, having trained my brain to see those highs and lows, could visually identify what the trend of the market is. And I could argue that long term, if we were to look at a long term set of highs and lows. So here's a high and here's a low. Here's a higher high. Here's a higher low. Here's a higher high. Here's a higher low. Here's a higher high. Here's a higher low. There's a higher high, higher low, higher low, higher high. There we go. And we just kind of keep that going. And we can even make that argument that there's a higher high. Now, we had this low that came back down. That was a lower low.

So we were in kind of an intermediate-term down trend right there, but if we were looking at this in the larger context, and we were looking at kind of those broad strokes, we could also argue that we've now made a low and a high, and that high is higher than those previous highs. And so currently, the market is in an intermediate to long-term uptrend. Right? How would we know that the market has changed direction? Well, we might say there's our previous low, here's our previous high, higher high. If we get a low that is lower than that previous low, then maybe the trend has changed, right? We can even look back at this time frame right here and say that's where that trend changed, where it made a new or even maybe right there where the trend has made a new lower low and that trend change occurs.

Usually. So understanding those higher highs and higher lows becomes very important for identifying trend. Now, three different time frames, and I want to kind of go through these. We did this, we touched on this a little bit last week, but I want to make sure that we have some clarity here in the context of our trend. So we've got three different time frames on this particular chart or on really any chart that we might look at. So I'm going to look at that time frame right there. That's a longer term time frame. Or an intermediate timeframe. And then I'm really going to get a little bit shorter as well. And I'm going to say, all right, what's going on in this timeframe right here. So that longer term timeframe, and I'm just going to label this L.

T., long-term time frame that we might refer to in this class. Is months. To years, months to years. So that trend could continue for multiple years. That would be a long-term time frame, right? Intermediate time frame, this one right here, this one that I'm kind of pulling out of the mix right there, I'm going to call that an I. T, intermediate term. Is weeks? to months. And you can write this down. This will be part of your notes for this class. Intermediate term time frame is weeks to months. And so we see that this is, you know, multiple weeks. It actually covers two or three months there in the context of that trend. So we had an intermediate term downtrend on the SPX.

That intermediate term downtrend has now turned into an intermediate to long term uptrend. But this time frame that we might pull out right here, right, that we're going to call a short term. And I'll just label that ST for short term. A short-term time frame is. Whoops. days to So that might be one or two days. That might be five days. It might be 10 days out to weeks. So maybe as many as four weeks, right, before you start getting in the months. So a short-term trend can become an intermediate-term trend, which can become a long-term trend. That might give us some sense of how we would break down the time frames on these trends. So what might be helpful for us in terms of trend identification, right?

Because this has all been discretionarily identified. And I just kind of drew those lines in there. And I ask in the workshop, I ask this question, would it be helpful if we had some sort of mechanism, some sort of indicator or tool that would help us to identify these trend directions by time frame. And one of the ways that we might do that is through the use of moving averages. So what I'm going to do is I'm going to put on this particular chart three different moving averages to help us to identify those different time frames, long-term, intermediate-term, and short-term on a daily chart. Now, again, remember, these are fungible across, portable across different time frames, so I'll show you how we can use those. But let's take a look at this here really quickly.

So I'm going to pop up here to my Flask icon up at the top of the page. It's S-I-M-P, simple, and we're going to choose a simple moving average. Now, by default, this simple moving average pops up as nine days. Now, you could leave it right there because a nine-day moving average or a nine-period moving average, right? A nine period moving average is Kind of a short-term time frame, isn't it, right? That's days to weeks. We might even go a little bit longer. We might even go 20 or 10. I'm going to go, actually, in this case, I'm going to go 10 days or 10 periods, right? I'm going to make this a 10-period moving average. And I'm going to change a little bit here on the Thinkorswim platform, the appearance of this moving average.

Now, here's the thing. Some of you are already thinking in your head the question, why a simple moving average? Why not an exponential or a Hull or a triangular or a displaced moving average? Because there are lots of different moving averages that we could choose from. Simple moving average is just a straightforward way to calculate this. The only reason that we use other types of moving averages is to adjust mathematically for some of the challenges to perhaps a simple moving average. It doesn't make them better. It doesn't make them worse. It simply makes them different than a simple moving average, a little bit thicker so that we can see it. I'm also going to change the color to kind of a more urgent red color.

The reason I'm going to make that a little more urgent uh in terms of that that color is because that's the shortest time frame that's the one that's most reflective of what's going on right now, so I'm going to click on okay and we're going to click on apply and okay, and there's our, there is our 10-period moving average, and we can see that that trend direction is up, so we could say objectively The 10-period moving average, which is reflective of the short-term timeframe, is moving higher relative to where it has been before. Therefore, this market is in a short-term uptrend. And we can say that objectively. That's not subjective. That is objective based on mathematical calculation. So if you want to answer the question, what's the short-term trend of the SPX?

Look at that 10-period moving average. If that's your definition for a short-term time frame, you can say with confidence that the market is in a short-term uptrend because that trend direction is moving higher. Now, let's go back to our flask icon again. We're going to keep that one on there, and we're going to add another one, SIMP, simple. So we're going to choose simple moving average one more time. We're going to come to the gear icon, and we're going to adjust this. A 50 period moving average. So that's five times our 10. So that's a little bit more than a month. That's actually more like two months and a half, right? Maybe. So if we think about trading days, that's a little over two months. Which puts us into that intermediate time frame, weeks to months.

So I'm going to change the size or the weight of that line to a 3, and I'm going to change the color of that line. In this particular case, I'm going to leave it kind of a nice neutral color because that's kind of a nice neutral color, and I'm going to click on OK and Apply and OK. And now I've got that intermediate term timeframe. So a couple of things that you notice with this intermediate timeframe, right? Currently, it is up. So we know that we're in an intermediate term timeframe uptrend, right? We can say that again, objectively, without subjective knowledge, that is an objectively identifiable and confirmed. Intermediate term uptrend on the SPX. We see that when we identified those lower highs and lower lows, that kind of intermediate time frame there, we see that that intermediate moving average had turned in a downward direction.

So we know that the S&P right now is in a short-term uptrend. It is in an intermediate term uptrend. And then guess where we're going to go next? The long-term uptrend. So I'm going to go back to that flask icon at the top of the page. average. We're going to add that to the mix. I'm going to go to the gear icon over on the right-hand side. We're going to make this now 200. periods or since this is a daily chart, 200 days, 200-period moving average. I'm going to make the weight of that line a three, and I'm going to make that color a nice peaceful green, nice happy green. You can make whatever color you want. It's your chart. You live in it. You can make that whatever color you'd like it to be.

There are no wrong answers when it comes to what color you make your moving average. So we're going to go ahead and click on OK and Apply and OK. And there's our 200-period moving average. All right? That 200-period moving average is reflective of the longer-term trend, and that now suggests if we look objectively at these three moving averages. Short-term, intermediate-term, long-term. We can say objectively, with confidence, that the S &P 500 is in a short-term uptrend. It's also in an intermediate-term uptrend. And it is also in a long-term uptrend as well. And we don't need to question that. Hopefully, that calms some of your concerns about identifying trend. And I will tell you something else.

A lot of the concern that comes about the market and about trends comes from Market commentary, news that's out there, and news purveyors that say, hey, this market's too high, it's got to go down, or it's in a downtrend, or maybe confusing the understanding of trend. So if you want to kind of calm that, that maybe creates some uncertainty and anxiety about what the trend of the market is doing. Put a moving average on it, or put multiple moving averages on it, and you can see objectively. You can say, cool, I know that right now the SPX is moving in an uptrend. Short-term, intermediate-term, long-term, I feel confident about that. All right. The other cool thing is we could take this from this standpoint.

We could say, all right, let's put any other stock that we might look at in this framework. Now that we've got those moving averages in place, let's put any other stock in that framework and take a look and see what objectively that current state is. So let's go back to HSY Hershey. The one that we looked at before. So here's what I happened to notice about Hershey. That as we look over here on the right-hand side, there are three things that I know about this particular trend. One is that the long-term trend is down. The 200-period moving average is moving in a downward direction. Two, the intermediate-term trend is sideways. The 50-period moving average is kind of moving sideways, right? It's pointed sideways. And three, the short-term trend has turned up.

The short-term trend has turned higher. It's made that little hook on that right-hand side, and it's started to move higher. So here's something to think about. That might give us some insight into kind of the trading mentality. How do we use this? I think might be the question that we would ask next. How does this help us in identifying a point at which we could get into the trade or we could get out of the trade, right? So some traders may use. Some traders may use the crossover of price around a particular moving average as an entry or an exit signal, and some traders may use the crossover of certain moving averages as an indicator to get into or out of a trade. So here's what we might say about Hershey's at this particular point.

We might say, look, the price of the stock is moving higher, the trade is where there is some confirmation that the short-term trade is moving faster, that short-term trend moving faster than the longer-term trend. So some traders might use that crossover of the 10-period moving average above, in this particular case, the 50-period moving average as a confirmation for an entry signal into the trade and say, you know what? This has been going sideways for a while. I want to get into the trade when it's giving me confirmation that it really is maybe moving in an uptrend. So objectively, the way that I might do that is looking for an opportunity to get in when that 10-period moving average crosses from below to above a moving average, say, for instance, the 200-period moving average.

And they might identify that point and say, hey. If this circumstance occurs, then this is the action that I'm going to take getting into the trade. Likewise, if you were in the trade and you were to see that reversal happen. So let's say we were back just a few weeks, right? And we saw that crossover happen. We got into the trade. There's that crossover of the 10 over the 200. We got into the trade at that particular point. We said, fine. That my condition was met. If price moves, or if the 10-period moving average moves from below to above the 200, I'm going to enter the trade. Then the next if-then statement might be, 'if, however, the 10-period crosses back below the 200-period moving average, then get out of the trade.' So that circumstance occurred just a couple of days later. We got that crossover, and that might have been the exit point for some traders. If price breaks or if that moving average breaks below the 200-period moving average, then get out of the trade, right?

Using these moving averages, here's the thing: we can take any particular stock; it didn't have to be the SPX; it doesn't have to be Hershey's; it doesn't have to be anything else. But we could take a look at NVDA, which is a stock that a lot of people look at. I'm going to take some of these other indicators off here; I'm going to remove that one and I'm going to remove that one. We'll talk a little bit about those levels of support and resistance. Coming up next week, we're going to talk about support and resistance. But here's what we might look at with something like NVIDIA. And I'm going to zoom in over here on the right-hand side so that we can see this.

We can say, OK, I know that the 200-period moving average is moving in an uptrend, that 200-period moving average starting to move higher. So we know that this is in a long-term uptrend. The 50-period moving average, that intermediate timeframe, also moving higher as well. So we know that this is an intermediate term moving average. Here's the other thing. Right now, that 10 period moving average is still moving higher; it has not changed direction, but Notice what's happening today: that price, that particular candle, is moving below and it's sitting right on that 200-period moving average or excuse me, that 10 period moving average. So some traders might say. For an entry signal, I don't want the price to be below the 10-period moving average. So they're looking for price to move up from that 10-period moving average, right?

So if price moves up from or bounces off of the 10-period moving average, then enter the trade, right? So that might be a circumstance that some traders might be looking for, knowing that it's still in an uptrend, but maybe not at the best time to enter the trade at this particular point. That's simply an illustrative and educational example, not a guarantee by any means. What if we were to take something like this one, which is maybe even a little bit more confusing, TSLA, right? Because look at what's going on right now. We kind of have this whole jumble of trends over here on the right-hand side. What's going on here, right? So let's zoom in on this timeframe on Tesla because we can see that we've got uptrends, we've got downtrends, we've got sideways trends going on.

This is where moving averages perhaps sometimes get a little bit challenged, right? And I want to present both sides and be fair about this, right? Because when the price of the stock is going sideways, when it's making roughly those equal highs and equal lows, moving averages kind of get jumbled up on themselves. And there is a possibility that by using moving averages as a trigger for entry and exit, you can get whipsawed in and out of trades. Kind of what's been going on here with Tesla. So, you notice what's happened here. If you were taking that trade, right, bounce off of the 10 period, it got up and then it broke down through. If you were taking the crossovers, right, we had a crossover back here and then it came back down.

If you were taking the crossover of the 50 over the 200, which some people call the golden cross, then you got into the trade and then it's kind of whipsawing back down again. So, there's a lot of different stuff going on here. So, how do you make sense of this? What you do is you decide, or what you can potentially do is you decide what time frame matters the most to you. Are you a short-term swing trader, meaning you're trading from one support level for a bounce to a bounce? Are you an intermediate-term trader and you're looking for a short-term move, maybe earnings to earnings? Or are you a long-term trend trader and are you looking to simply get in at an advantageous point and not trying to maybe get in on those crossovers, but just capture that longer-term trend?

So that can help us to make a decision, right? And again, knowing the timeframes of these three technical indicators, these three moving averages, can help us to make a decision. So here's what I happen to notice. On this particular chart in terms of Tesla. And again, this is an illustrative example. This is not in any way any kind of a recommendation. But I noticed that the price currently is above the 50 period moving average. It is above the 200 period moving average. And it is above the 10 period moving average. So what a trader might do is look for an entry. And we're close, but not there. But we might put together a trade that says, fine, if price breaks above that 200-period moving average, or if the 10-period moving average crosses above that 200-period moving average, then enter the trade, else wait.

And if the 10 period moving average then breaks above the 50 period moving average, then maybe add to the trade else weight, right? So both of those are circumstances that we could use in putting this trade together using the shorter term time frame as the defining factor for getting into or out of the trade. Yeah, unfortunately, Jay, we don't have crystal balls. We don't know what's going to happen. The price of this could go down tomorrow. Right? So all of those things are kind of in that context, right? So let's take a look at something. Maybe let's look at this one, DIS, Disney, okay? So here's what I happen to notice on Disney is that price right now, 200-period moving average is moving higher. 50-period moving average is moving higher, so it's in a long-term uptrend.

It's in an intermediate-term uptrend. And the short-term moving average, that 10-period moving average, has now gone sideways. It was moving higher. It kind of pulled back a little bit, but it's now turned sideways. And what is price doing at that 10-period moving average? It is bouncing fine. So I might say, fine, the stock is bouncing off the 10-period moving average, going sideways. I've got a long-term uptrend. I've got an intermediate-term uptrend. I feel okay entering the trade. So, I might come in here and go right-click, buy, and we're going to put in a trade here. I'm going to put this in my stocks group. And we're going to say, fine, I'm going to get into this trade. I want to buy Disney because it's bouncing up off of that 10 period moving average.

Everything else, all of those longer term trends are moving higher. Not a recommendation by any means, but I'm simply looking at getting into the trade here. And I'm going to bump my limit price up a little bit because I got it right down there below. And we're going to say, fine, I'm going to buy it within this range right here. Click on. Send, and we're going to fire that order off, and I end up getting into the trade now based on that simple moving average and price bouncing up from that simple moving average. Now, we might also use that simple moving average as a means or the longer-term moving average or the intermediate-term moving average as a means to exit the position.

So you know what I might do now that I've got that position in place is I might say, look, I know where that 50-period moving average is. I might say, look, 117 is where that 50-period moving average is at this particular point. So I might come over here to my monitor tab and I might open that up and go to my Disney position. Let's see where that is. Did I put it down here in stocks? Let's do that. There it is right there, there's my 100 shares of Disney. Right-click, create a closing order that says sell this on a stop; remember, stops aren't a guarantee about where that price is going to get filled, just a determination of where that order to get out is going to be triggered in this particular case, so I'm going to make that one at 117 even.

And I'm going to put that good till canceled. And I'm going to click on confirm and send, and send that order off. And now that order is going to be sitting there waiting to take that trade off if the price breaks down below that level where the 50 period simple moving average is currently. Now, I'm going to have to adjust that. Or I can use a trailing stop. Or in some cases, and we'll talk a little bit more about this in other classes, we might use that technical study, the simple moving average, as a means to trigger our stop loss. So a lot of different ways that we could go about doing that. Lots of great stuff here, guys. But we've really kind of dug deep into this understanding of using moving averages.

There's lots more to learn, though, about that. Next week, we're going to talk about support and resistance. To learn more about moving averages come to our Trader Talks webcast page; remember to click on subscribe you can do that at the bottom of the page as well, but here's what we're going to do: we're going to type in 'moving Average' and we're going to type that into our search box. And now you're going to see all of those webcasts that talk about different types of moving averages; Connie's taught some, Cameron's taught some, James Boyd has taught some. Brent Moores, who's out there in the chat with you right now, has taught a number of these. Great way to learn more about these moving averages.

And by the way, if you want to learn more about those events that we were talking about and uh, our live webcast, come over here to Schwab. com forward slash coaching and join us right there. Remember, you can also follow me. You can follow Brent on X in social media at BenWatsonCS at Brent MoorsCS. We would love to see you over there. Thank you all for asking a lot of great questions. I know Brent answered a bunch of those questions along the way. Remember to leave your comments if you're watching this in a recorded version, in that comment section, as well. So, next time, we're going to be talking about support and resistance, those turning points that create those highs and lows in the trend. So my thanks to all of you. My thanks to Brent Morris. My thanks to our great production staff, Bree and Gabe, and everybody else, and our reviewers for watching this as well. Have a great day, everybody. We'll see you next week. Take care. Bye-bye.