Hello, everyone, and welcome to Schwab Coaching. My name is Cameron May. I'm a Senior Manager of Trading and Derivatives Education here at Schwab, and this is Getting Started with Thinkorswim. And I think just about everybody here can recognize that when using charts to plan a trade, there's an art to it. So today we're gonna be focusing on the artist's tools. We're gonna be talking about the drawing tools that are available on Thinkorswim charts. We're gonna be actually going through the first 12 drawing tools that are 24 in total. I'll leave the remaining 12 for another follow-up discussion. But I think this is gonna be a good introduction to some tools that are gonna be familiar to some. It's gonna be maybe some new stuff for others. I think it's gonna be great.
Looking forward to this discussion. Before we get to that, though, let me first of all say hello to everybody who's already chatting in out there on YouTube. Hello there, Jim, Ian, Lawrence, Andrew, Eva. Who else is here? I know I've seen some other names. Matthew, everybody else, thanks for joining us week after week. I definitely appreciate your attendance and your contributions to the discussions. If you're here for the very first time, I wanna welcome you as well. And if you're watching on the YouTube archive after the fact, enjoy the presentation. But be aware that you're invited to join us in the live discussion. This one is a Wednesday webcast series, kicks off promptly at 2 Eastern. If you'd like to be here for the live stream, we'd like to have you here as an attendee.
Also wanna let everybody know that I'm being joined in the chats by a new friend, Kathy. Kathy Wynn's gonna be joining us. She's gonna be answering any questions that I can't get to during the flow of the presentation. I'll try to address as many as I can. Kathy's just basically there to just help pick up the slack if I'm dropping the ball anywhere. So thanks for being there, Kathy. I'd also like to issue an invitation to everybody that's watching. Whether you're watching a live stream or you're watching on the archive, that's fabulous. But if you have an account with X, make sure that you're following your favorite presenters there. So you can follow me on X at CameronMayCS. It is the best place to connect with me in between the live streams.
But let's get into this discussion of the drawing tools on Thinkorswim charts. And as we do that, of course, we first need to pause to consider the risks associated with trading and investing. Risks are certainly real. So, bear these important disclosures in mind. The information here is for general informational purposes only and should not be considered an individualized recommendation or endorsement. In any particular security, chart pattern, or investment strategy, Schwab does not recommend the use of technical analysis as a sole means of investment research. Investing involves risks, including a loss of principle, and any investment decision you make in your self-directed account is solely your responsibility. Okay? So let's go right to the Thinkorswim desktop trading software platform. And I typically set, you know, a fairly elaborate agenda, three or four items on the agenda.
But for today, we're just talking about how to use these drawing tools on Thinkorswim. I suppose what we're going to be doing is I want to show you where to find them, how they might be used, and what sort of value they could conceptually, potentially deliver to a trader who's using them in the planning of a trade. So let's go right down here. Now, there are a few ways that we can load up our drawing tools. What you'll notice is I'm going to be doing that primarily down here through a menu by clicking on the active, and then I'm going to be doing that primarily down here through a menu by clicking on the active, This icon, as we go through, is going to change.
We get a different icon each time we use a different tool. So I wouldn't say that we're going to use the arrow icon down here because it might be an arrow, it might be a line, it might be an oval, depending on which tool we're using. But we can also find the drawings up here. We can go up to the menu at the top and just go to the drawing tools here, and you'll find this menu of icons. Another way that we can access those tools is to right-click on the, and just add a drawing using this now familiar sort of set of icons. But really, probably the quickest way to access these, it's my preferred way. Preferences can vary from one trade to the next, so navigation is up to you.
But we can find them right down here. Click on the active drawing tool. In this case, it's the arrow tool. And that gives us this assemblage of 24 drawing tools. So we're going to be working through, the basic ones, the pan and the pointer up here at the top, down to the middle, the regression line and the regression channel tools. So let's just start right up here at the top right now. I'm using the pointer. I call it the arrow tool. But the pointer and the pan tool, fairly similar, little bit of a difference though. Some people have the impression as we choose between these two, well, maybe it just means, do we have a preference for having, an arrow or maybe a hand with a finger pointing at where we are.
You'll see that they share some similarities. As I move around, we're going to see little crosshairs that can show me an intersection of price and time. Those both appear with these tools and with others. But the pan tool allows us to go over here to this margin off to the right and pan that wider. So this is what we call the right expansion setting. And this is what we call the right expansion setting. And right now you'll notice if I were to go down here to the little double-headed arrows, and if I were to change the right expansion setting sort of manually, you'll see that I have 10 bars to the right of my last candle. 10 bars just means essentially on a daily chart, that's 10 days of extra space out here.
Now, if I wanted to create more space, I would choose my pan tool and then click in that right space and just click and drag it over and it actually expands pans forward in that right expansion area. Now I can switch it back if I want to, I'd come right back down here and just change that back to 10 if I like. But now one thing I cannot do when I've selected the pan tool that for some of our users, it's a familiar tool, is do a click and drag highlight of a period of time. So for this, so notice if I do it, do a click and a drag over here actually doesn't do anything. But if I switch now to our pointer tool, now you can see we have the pointer because I no longer have the hand with finger.
Instead, I have that arrow. And let's say that I wanted to get a closer look at this strong finish to 2024 on Apple here. Let's go to the start here and just click wherever we want to start a highlighted period and drag forward. What you'll notice is we're getting this darker field around the period that I've clicked and dragged over. This is preparing to zoom in on that timeframe. So let me just release that click. And now we're just looking at those last couple of months of 2024. We still have access to the rest of the chart down here using the scroll feature at the bottom. So I can scroll to the right, I can scroll to the left, or I can just go back and forth one candle at a time by using the arrows.
Now, one other feature as long as we're here, it's not a drawing tool, but it's a little bit of a tool. But it's related to this pointer drawing tool is a new feature that's just been added to Thinkorswim in the last couple of months. I think it was just last month as a matter of fact. And if we go up here to our chart settings, I'm going to go to the time axis because we've zoomed in on a period of time. It's that time axis that we're manipulating. And I'm going to check the box for show chart navigator. Now, how many of you are familiar with this little tool, this show chart navigator? If I click on that, and click apply, what that does is it replaces our traditional just scroll bar down at the bottom, instead with this thicker sort of translucent scroll bar that allows us to see visually if you'll see this gray area behind, it looks like a gray mountain.
That's actually a representation of the one year chart of Apple just squeezed down into that scroll bar field. And now I can see where I am. Relative to the rest of the year of Apple by scrolling like this, kind of a nifty new little feature. Yep. Greg, I did do a session on this a couple of months ago. So anybody or a month ago, anybody that happened to watch that would already be familiar with this. I would suspect that most people though aren't aware of that. Gazelle says, is there a way to change the color of the Friday expiration line? So Gazelle in the interest of time, and to keep this discussion on track, I'm not actually going to be exploring this. I'm going to be exploring unrelated features to the drawing tools on thinkorswim.
It's a legitimate question you've asked. It's just that I prefer not to go off on too many tangents, if you'll forgive me for that. But let's remove this tool. Let's go back to our time axis and just uncheck that show chart navigator. You can also see that our expansion area, thanks to the earlier tool that we used is now 15. Let's switch that back to 10. Cause you're going to click apply. Click okay. And then we're going to zoom back out using little zoom function down here in the lower right. Zoom out. And now we're back to our familiar screen. Greg, you enjoyed those new features discussions. Good. Yeah, I like doing those. I think it's fun to sort of show the rollout of new features.
So I keep an eye out for that kind of a thing. So that's our first two tools. Our next tool, possibly the most commonly used tool when drawing on a chart, is our trend line tool. I get questions all the time. Cameron, how'd you get those nifty lines on the chart? I just drew them on there and here's how we draw those on there. And a lot of the skills that we're going to acquire as we're practicing with our trend line tool are going to carry straight forward to the other tools that we use throughout the rest of this demonstration, and throughout the rest of our drawing efforts on Thinkorswim charts. But let me select the trend line tool, and you'll notice now my cursor is a little pencil.
So it's ready to start drawing. And the way to draw a line on the Thinkorswim charts is to just go wherever you want to start the line. Let's say that our trader is looking at this apparent price floor around where we are right now, around that 216, maybe up to 219-ish level. But we go wherever we want to start a line and just click once. And this is not a click and drag. Instead, we just go over to where we want to end the line and click again. Now, one thing that I do, commonly do, as I'm drawing lines, I like to get them nice and flat. I don't know if any of the rest of you are kind of perfectionists like that. I like to get this nice and flat.
And this is where the crosshairs that follow our drawing tools around can be useful. If I move up here with the end of the line that I'm drawing, you'll know it's getting out of whack with my horizontal crosshair line, that horizon line. So if I bring that into line, let me see. Let me just swing this down here and so you can see the two converge. Now I know I have a nice flat price level and I can click and set that line. Now, once a line has been drawn and you'll notice in this case, I wind up with a line that starts at a specific point. It ends at a specific point. It is a thin black line, but if you've been watching my webcast for any period of time, you know that typically my lines are actually a thicker dashed blue line.
That's because when we, when we make drawings on Thinkorswim those drawings are customizable and we can customize just one or we can make those customized those customizations the default for the one that we're just changing and also for all future drawings of a similar type. So let me show you what I'm talking about. Once we've drawn something in this case, it's a line we can right click on that drawing and edit the properties of that drawing. So I'm going to edit the properties here and we can give this drawing a name. We can assign it an arrow. Let's do this. It says arrow. There's no arrow on this. Let's say we want arrows to the right so I can choose an arrow. Um, I'm not going to, should we apply a label?
Sure. Why not? We'll call this support. There we go. And do we want to show that label? Let's show it on the left. Um, how about actually, I'm sorry. The label is not there. It's not the name. I'm actually getting ahead of myself with a, uh, with a different tool. We'll, we'll come back and show you how to, how to show names. Label actually shows the properties of a line, but I'm going to turn that on. Anyway, let's, let's turn on that show label on hover left extension. How about we turn that on left extension means right now our line is ending right here, but we can extend that indefinitely to the left. We can extend that indefinitely off to the right, but just to show you, an arrow.
Um, let's, let's, uh, not extend it off to the right. Let's extend it to the left though. We can change the start point and then pardon me, the start point and end point. If we really want to be precise, let's say we want this to be just absolutely completely flat. We can just make sure that those two values match the start point and the end point. Now we know we have a perfectly horizontal line. If we want to get to finicky with that, all of these may be less common. Let's look at some of the commonly used, um, changes to the tool. This one is I think quite commonly used. Let's change the color for this line and for future lines to blue. That's what I typically use anyway.
Let's change the style from a solid line to a dashed line. And instead of having a thin thickness on a scale of one to five, let's change this to a five out of five and save all of these changes. As our default. One thing I'm going to remove here, I don't really need to put a name on this. You can experiment with that on your own if you like, but let's just save this as our default. It's going to insist on a name since I started a name. That's okay. We'll pop it back in there. In any case, let's save these changes as a default and click okay. And what you'll notice now is we have this nice dashed line. Oh, by the way, let's right-click. Did I not extend that to left?
Did I switch that back? Let's extend that to left just so you can see what that extension looks like. But from now on, any line that I draw is no longer going to be a thin black line. It's going to be a thick blue line with a little arrow on the end. Now, one final customization I'm going to make is I don't typically always have that arrow. Let's right click on that, edit those properties one more time. I'm going to take that arrow off and save that as a default. There we go. So a lot of customizations that can be made. Also, with time, we may just decide I don't really need the line where I've drawn it. Maybe I need a new line.
Well, we can either right-click and delete the drawing by selecting remove drawing, or we can activate the drawing. When we activate the drawing, it allows us to either click and drag on that line to reposition it. Maybe we wanted to move it up here, over here, or we can use the little boxes at the end, to reposition that line. So we just click and drag those. And once we're satisfied with where we've positioned the new line, we just click anywhere else on the chart, and that sort of fastens the line to the chart. Now, the one change that I did make, I showed you how we selected show label on hover. That means if my cursor is hovering over any line that I've drawn, it's going to show me this label.
So that label is showing me the characteristics of the line that I've drawn. So for example, and this one's just randomly applied to the chart, but I can see from the start to the end of that line that I've drawn it's 148 days, or that's 148 calendar days, or 102 trading days or bars. We see a 2 . 05% increase in price from the start to the end. We have a $4 . 84 dollar amount change from start to end, and a 2 . 54 degree inclination. Now, I don't know about you, the degrees of inclination to this, I suppose they could be useful, but I think for most, some of the more valuable things might be how long was this line, and how much did it go up in percentage amount or dollar amount.
So that can be a nifty little feature to have activated on a drawing line. Now, let me read some of these chats here. George says, perhaps the tech team can add control key hold down to keep degree at zero on horizontal line would be helpful. So George, we can do that, or we just choose another drawing tool. Guess what's coming up next? A price level. It's always set to zero. It doesn't go up or down. So the trend line tool allows us to draw perfectly horizontal lines if we like. Or up or downward sloping trend lines. Our next line, if we right click on that, how about we do this? Let's remove each of these drawings. I'm going to right click. Let me see if there's anything else I wanted to show you here.
I think I'm okay with what's been demonstrated, but we can delete our drawings. If we start to put a bunch of drawings on the chart, we can delete them one at a time. Or if we right click on any one of them, we can just clear off the whole drawing set. It's going to erase everything on the chart. So because it's going to do that, it gives us one last chance. Cameron, are you sure you want to remove all the drawings from the set that we call default on all your devices? Yep. And they are gone. All right. So let's move on to our fourth drawing tool, which is the price level tool. Price level. Right click on that.
As I click to start the drawing here, and I'm using the same skill set that I developed using the trend line tool to draw something, we click once to start the drawing. We click again to end the drawing. Let's just click to start drawing this line. But if you'll notice, as I move around, it's no longer tilting up or down. It's always horizontal. So I can now position this trend line just right at, let's say, that support area again and click again. And now it's drawn this nifty little thin black line. Now, as we discussed before, not everybody likes these little thin lines. Let's change some of the defaults here. Now, with this, I could right-click on it. I could remove the drawing if I wanted to.
I could clear all of the drawings if I wanted to. I could also change features just right from here, like cancel that right extension. Notice that it's sticking off here into the future. Let's cancel that so it ends right where I drew it. Or if I right-click on that, I can extend to the left. I can right-click on that and extend to the right. I can right-click on it and duplicate that drawing. This is a trend line tool and create a second line that I can then draw that's perfectly parallel with the first one. OK, so lots of things that can be done with just a right click, but also with that left click, I can activate the drawing to reposition it. Now, I could have lengthened it if I wanted to or extended it.
I can also right click on that and edit its properties. So for this case, let's create a new one. This is what I started to talk about with the last one where I was getting ahead of myself. So this is support. We'll just call this one support as well. Our left extension is on. Our right extension is on. We can turn those on or off. Let's show our name. How about we show this on the right? And let's also show the price level on the right. So over here, it's going to show us support and a price level. And let's say we wanted that to be at exactly two hundred and five dollars. We can change that value there. We can also change the the beginning point specifically.
Gina says, how do you get back the first one you saved as a default? So, Gina, that was our trend line tool. If I go back to the trend line tool, all of a sudden you're going to be seeing dashed blue lines again. So it would be just choosing this down here. Right now I'm using the the price level tool. But let's make this one blue. Let's make this one dashed. Let's make this one a five out of five. And let's save those default settings. So what that's going to do, if we save these settings, it's going to keep that left extension on. It's going to keep the right extension on. It's going to show any names that we give. It's going to show price levels and it's going to be this new color scheme that we've set up.
So let me just click OK. And you'll notice here it says Support on the left, which is where we told it to. And although I think I. Indicated physically on the right because I wasn't thinking anyway, but there's our price level. This is telling us, hey, Cameron, here's your support level at 205. Is that where support is? Probably not. Let's right-click, activate that and drag and set it up there. So. Once we get familiar with the general navigation of these tools, it gets pretty, pretty quick. Now, if I draw any future tools, they look very much like the first one. If I want to change the defaults for those right, click edit the properties. Let's turn off the extensions. Actually, let's leave the right extension on and let's not worry about having a name for the future.
So let's just save that as our new default. And now when I draw a new drawing, it still shows the price. It doesn't have the extension sticking out the left, but the extension still sticking out to the right. So now let's clean up our charts, right. Click. Let's clear the whole drawing set. There we go. And move on. Now, again, just to go back to your question here, Gina, if I wanted the other drawing tool, I'd go back here. Trendline tool. Now I can draw those. All right. Right-click and remove that. Third tool is our time level tool. Now, this one is really just showing us it's basically, instead of a price level, it's a time level. So instead of having a fixed straight line going sideways, it's a fixed vertical line.
Everything else, effectively the same. So I'll let you experiment with that, but we just draw it by clicking once to start drawing, and you can just move it around to wherever you want it, and then click again to fix that line. But there are all sorts of times when a trader likes to have visual reference points. Maybe they have some trade that's ending on a certain date. But we can. We can edit the properties. We can do all sorts of other, you know, change the extensions, give it a name. We can show the name. We can show the date if we want to. We can give it, we can change that value for where we started it. I'm going to let you experiment with those because now we're not learning new skills.
We're just being aware that there are different tools. So I'm going to right-click here. Let's remove that drawing and move on to our sixth drawing tool, which is our text note tool. This is just the one sometimes you'll see me, like, make a post on X. And you'll see that I put notes on the chart. Well, that's using this text note tool. So let's select that. And as long as we see the T down here, this now allows us to click anywhere on the chart. Wherever we click is where it's going to set that note. And we can just type in our message to ourselves, click OK, and there's our little note. And it is kind of a little note by default.
If we want that to be more bold, if we want it to be a different color, if we want the arrow to be on the left or on the right. So, for example, let's right-click here. Let's edit the properties. And let's say, ooh, no, we have a support break. So that's going to be our text. Let's have the arrow. Notice we had an arrow. Let's put that on the right. Let's make this. I'm going to stick with blue for today. Let's make it a little bit bigger. How about we make it bolder? And we click OK again. Now, one of the things that we could do, maybe I'll come back to this, but let me just click OK. Notice now we have a blue note with the arrow pointed to the right.
I can right-click on this and activate it and reposition it over here. Hey, do I have a break of support? Have we now fallen below maybe that 220? Area of support? Bill says, can you save different tools for each different stock? You can. Actually, you can set up drawing sets right down here, Bill. I think I'll leave that to add to a future discussion, but maybe explore that, setting up what's called a drawing set. Anyway, one other feature I do want to show with the text note that some people aren't aware of is we can actually get kind of wordy. We want to make a big note about something that caught our eye on a stock, and so we leave some fairly extensive notes for ourselves on a chart.
So let me just right-click on this. Let's edit its properties. And let's just suppose that I had a lot going on with this, but I didn't want this cluttering up my chart like that. Well, we can right-click on it, edit its properties, and change the way it's displayed. Right now, the display mode is to show the full text on the chart. Well, we could choose just an icon. We could show just the first line, which would just show this part of it, or let's show it just as an icon and click OK. So now we have this tidy little T. Let me right-click on that. I'm going to activate it, pull it down just a little bit so it's not overlapping with that dashed line.
But as I hover over that, I can check my notes, but it doesn't have to clutter up my – my chart the whole time. All right, so let's clean up our chart again. Let's clear our drawing set and move on to our next drawing tool. Next up, we have arrows. When we select an arrow, this is just preparing a little tiny arrow. If I click here, it just starts to draw an arrow. Now, your default arrows are not going to look like mine. I have kind of – you wouldn't think of these as being big arrows. They're still kind of small on a chart. But the – the default construction is a smaller arrow, even smaller than what you're seeing here, that's black, and it points by default to the right.
That's because I've changed the default settings for my arrows. Let's sort of switch them back. Let's right-click on this one up here and let's edit its properties. So I'm not going to give these names today, but notice the direction can be selected here. Let's change the direction to right. Instead of selecting extra large, let's go back to the small that would be typical, and let's make these black. And if I save this as my default, click OK. Now, I click – actually, it's not the extra small, it's the default. I think the default is just small. It's been a little while since I changed this one, but I'm pretty confident that's the case. And now we're getting these little tiny arrows.
Traders sometimes just like to have a little reminder to themselves, you know, keep an eye out for something here. So that arrow tool can be useful. And if we want to edit some of the properties of an individual arrow, we don't necessarily have to go into edit properties. We can just, let's say, change direction right there. Say I want this one to point up. There we go. Now that one's pointing up. So we have our arrow tool. So let's move on to ovals and rectangles. I get a lot of questions about ovals and rectangles, because I use a lot of them in my presentations. Eva says, is this a live chart or is this paper money today? This one's a quote-unquote live. It's still really a fake account.
But yeah, this is the live version, although these tools are available on paper money as well. But my ovals, and in particular, you'll see me using rectangles in some of my webcasts, and people say, how did you get that on your chart? Well, I just drew it on there. So whether we're drawing an oval or a rectangle, we just select our drawing tool. And let's say we wanted to call attention to, by the way, let's clean off all these arrows, right-click on them, clear the whole drawing set, yes. Let's say we want to call attention to this apparent support break again. And maybe I want to put an oval around maybe a candle or two here. To draw our oval, you go to where we want to start the oval.
And let's say I want the top of the arrow oval to be up here, the bottom to be down here, the left over here and the right over there, sort of encompassing these first two. So I'm going to go up, sort of imagine the upper left quadrant of that oval. And I'm just going to click up there to start drawing that oval. And then I'm just going to move to where I want to end the oval, down to the lower right and click again. Now, I could have gone from lower left to upper right. It doesn't matter if we're going up to down or down to up. But what we're left with is this oval. Now, mine is this nifty shade of kind of robin's egg blue.
It's not really robin's egg, it would have more green in it. Anyway, that's because I've customized its properties. You can right-click, edit the properties of these as well. Changing, you know, if you don't think you got the position quite correctly, you could change that here. But I'm just going to change the color. And to change the color of these sorts of drawings, there's a default palette, fairly limited in its choices, or we can click on more and we get this much more expansive palette. And so I just chose one of these bright blues. I clicked OK, and then I saved that as a default. So now that changed the color of the first oval that I drew and every subsequent oval thereafter. If you don't edit those properties, the default color is going to be like a faint gray.
It's going to be something like this. If you really want to see what it might look like. So that's how we draw ovals. It's also how we draw rectangles. So we change our rectangle tool. Maybe we wanted to capture this channeling area right here. We can right-click on that, edit its properties. Let's say we wanted our rectangle to be maybe a green. Nice, encouraging, soothing, green. Let's change that to our default and click OK. And from now on, whenever I draw an oval, it's going to be a green. So let's right-click. Let's clear that drawing set. And how many have we done so far? I think that gets us through nine. We have three left. So we have our channel tool, we have regression lines, and then regression channels. What are those?
Well, a channel tool is just where we have two parallel lines that are intended to encapsulate an area of price activity between, let's say, support and resistance, price floors and price ceilings. So what you may have noted with Apple is it's had a real tendency over the last eight months or so to trade within a range. Now, there's a little bit of an upslope over time, maybe even a sideways. So we're going to go back to that range. But really, if we come right down here, click once using this channel tool. I'm going to go up here and click again. That draws our first line. But if you'll notice, I'm going to start moving my cursor around. It's preparing to draw a second line.
Let's maybe move it up here toward the top end of that trading activity. For some traders, it might go to the absolute high. Others might go down to where they're getting maybe a few more touch points. But once we're satisfied with where we've positioned that second parallel line, we just make a third click, and that sets that line. And then we have all the customization features, plus a few more with this tool. So if I right-click on this, I can extend it to the right if I want. If I right-click on this, I can remove the drawing. I can also edit its properties. And one thing that I want to do is I want to make sure that I have all the features that I need.
So I want to make sure that I have all the features that I need. So I want to make sure that I have all the features that I need. So I want to make sure that I have all the features that I need. So I'll just let you experiment with that now, if you like. But one of the features that's used fairly commonly with this tool is the channel curve properties. If I check this box next to the 0 . 5 coefficient, that's a fancy way of saying, hey, I want to draw another line that's halfway, 0 . 5 of the distance away from, you know, if we call the lower line zero and the upper line one, let's draw something to halfway point, right in the middle of all that price activity.
And then we can assign it some visual values. We can make it a, it's just going to draw a line right through the middle. Let's just leave it a black, thin line. Bill says, can you customize your channel tool to show two standard deviations? I'll do that on our next tool, Bill. Good question. Wow. All right. Anyway. Let's just click OK, and here's what we're left with. We have a center line that's right between our two support and resistance lines. And for some, they see that as potential reversal zone. If we have a stock that's trading within a $10 range, for example, it's not uncommon for that stock to also find support and resistance at about the $5 mark in between.
So for some traders, they like to have that and they can set that as a default if they like, or just apply it one time. For this demonstration, we're just going to do it once because I want to leave some time here, Bill, to get to your question. Let's talk about these last two tools. I'm going to right click on our channel line and let's just remove it. Okay, our last two tools are linear regression lines. How many of you are familiar with linear regression? The first one we're going to use is just a plain old regression line or linear regression. I'm going to select that, but before I apply it, I want to talk about it conceptually. So a regression line attempts to draw a line right through as close to dead center through any given timeframe of activity as possible.
So for example, let's say we wanted to draw a line through the middle of all the trading activity as close to center as we can. So we're trying to get as close to as many candles as we can for Apple for these last 12 months. Well, if I were to draw that manually and I'm just going to eyeball this, this might be terrible. So, if I were to start up here, let's start 12 months ago. I might need to go up a little bit, I'm just estimating. Maybe not, maybe down around here. It's kind of hard on this one. But if I were to draw a line, getting maybe half of the candles above, half the candles below, low, going through the center of price activity as closely as possible.
I might draw it somewhere like that. Now let's see if our linear line tool, our regression line tool agrees with that. So here's the way we apply a regression line. We just go anywhere on the start date and anywhere on the end date. So it doesn't even matter where. I could go up here and click once and then go all the way here to the end and click again. Could be up here, could be down here, it doesn't matter. I can't believe I got that close with my drawing, with the line that I drew. That wasn't intentional. It was just a good guess. Anyway, it's not paying any attention to what I originally drew with my blue dashed line. This is now just a line that's going as close to center as possible over the last 12 months.
And for some traders, they use this as a potential indication of trend and they use this as a potential indication of trend and they use this as a potential indication. It also may be an indication at times for possible areas of resistance, price ceilings or price floors. And you can see it did a pretty good job there. You'll notice all through this area, price would come up to that level and kind of struggle, finally broke through. And then for months, it stayed above that level. And then here for about three weeks, just below and so on. So yeah. TP says great. Hi, you're great. Thank you. I couldn't do that again on 10 other charts if I tried. Anyway, but that's the concept of linear regression line.
The idea here being, if linear regression represents quote unquote normal prices, well, if we get well above normal, where might those fine supports be? Where might the buyers come back in? Well, maybe if we get closer to normal. If we depart well below normal, where might the buyers be a little bit less reluctant to come back in if prices have been climbing? Or maybe just as we get back up to normal again, maybe it sort of levels off there. I think that's basically your concept. Well, for some, and this goes back to Bill's question, they like to know a range from normal. How far can we go from normal before it gets to be abnormal? Well, let me clean this up, I'm going to right click on these drawings.
Let's clear the whole drawing set off. And let's add our regression channel tool. So, the regression channel tool also uses the regression align. It just draws two other parallel lines above and below that line. So I'm going to I'm going to position it exactly the same way. I just choose my time frame. It doesn't have to be the start of the chart to the end of the chart. I'm just doing that. Today, but let's go to the start, go to the end, click, and we have this now familiar regression line. But above and below it, we have two other lines: what in the world are these? Bill, these are actually um standard deviation lines! I can't get too deep into what a standard deviation is; just think about it as for any given data set um if I want to capture a big chunk of that data, how far out do I have to move the envelope around the data to capture 68% of it?
To capture 95% of it, that's what we call one standard deviation and two standard deviations. That's about as far as I want to go with what exactly a standard deviation is. But the concept here is: when price gets above normal, as defined by Limp by the regression line, how far might it go still within a normal range before starting to snap back in either direction? So this uh this regression channel draws a line one standard deviation above and below that linear line, the regression line, and and that ultimately Wind up capturing a good chunk of of all price activity now this is constructed if you're wondering about um the time frame here, the default is is a 21-day standard deviation okay um but if we want to change those deviations we can right-click on our tool once we've drawn it and this is getting a little bit deeper in the weeds let's edit the property; the properties here and right here is where we can change
those deviations from one to let's say two, this would change it from trying to capture 68 percent of price activity above or below to 95 percent of price activity or above or below and I'm just going to click ok and now I have A much wider standard deviation line, okay, let's set that back to defaults, edit the properties, switch it back here to plus one and minus one. Click ok, alright! But guys, with that there is an introduction to 12 of the drawing tools on Thinkorswim desktop. I think you see some powerful tools here for our traders. Um, kind of a high-level introduction. We're going to leave those other 12 tools for a future demonstration but just make sure that on a weekly basis you're just checking out the webcast whether you're here live or on the archive.
So if you if you want to catch the archives for previous webcasts first of all make sure that you're subscribed to our trader talks channel on youtube you can go down below the video stream right now and click on the on the subscribe button if you haven't done that already because youtube is where we have the best of the best of the best of the best of the best of all of our previous webcasts you can find those playlists right here so you'll look for trader talks schwab coaching webcast find our home page and on that home page you can find the playlist right here you can join our live streams right there so for example if you wanted to see the playlists of my previous webcasts in this series you could click on playlists And scroll all the way to the bottom, mine happens to be the playlist at the very bottom, getting started with Thinkorswim, there we go.
And you can see last week's discussion guide, to placing orders. All right, another thing that you might want to do as a service to yourself is to follow us on X if you have an X account, follow your favorite instructors, there you can find me there at CameronMayCS. Let me just show you that so this is the guy you're looking for, beard has changed colors, there's the backdrop, there's the handle at CameronMayCS. You want to be precise with this or it might be someone else's account at CameronMayCS but. This is where we can get your thoughts and observations on other developments in between the live streams, for example I just posted this just a couple of hours ago. It was interesting that yeah, the S&P 500 has now officially dipped just slightly beyond 10 percent-that's what we'd call a correction.
We haven't seen one of those since October of 2023 when we dipped 11 before rocketing back up. So, we'll see where the markets go from here, but uh, those market corrections yeah tend to tend to come about every year or two so this one was kind of on schedule-never a guarantee that that's going to happen, but it happened, though. Time, everybody! Thanks for giving me your time today. Thanks to all of you who have already clicked that that thumbs up with that like button-we've got 110 people, People watching, and 44 have already clicked the like button. That's very much appreciated. That sounds like applause to me. That's the way I interpret it. It also gives my webcast a little boost in the YouTube algorithm.
Every time somebody clicks that like button, it helps more and more people find the webcast. So it definitely helps everybody to do that. Hey, thanks, Kathy, for helping out in the chats. Very much appreciated. Everybody, I am going to let you go enjoy the rest of our webcasts for the rest of the day. I'll look for you in my own webcasts. I have something new every day of the week, so I'll look for you in a future webcast. I'll also look for you on X, but whenever I see you again, until that moment arrives, I want to wish you the very best of luck. Happy trading. Bye-bye.
