Thinkorswim is a ridiculously powerful platform. Pretty much any technical indicator or study can be used to implement practically any strategy you can name. However, some investors may find themselves overwhelmed by so many options, and find it hard to figure out where to start.
Automation is the Key
One rule of thumb is to automate as much as possible in life. If you find yourself repeating the same task over and over again, chances are there is a way to automate. Let the computers and robots do the heavy lifting for you so you can utilize your most important asset - your brain - to do the qualitative critical thinking that the computers cannot do.
This further frees you from the computer, and with today's mobile power built into smartphones, lets you trade anywhere your phone will travel with you.
Bollinger Bands and Options Trading
In options trading our goal is often to earn the best premiums for selling our contracts. Typically the more volatility a stock is experiencing, the higher premium the stock option is offering.
Bollinger Bands are a great tool for measuring volatility, and often a lead indicator for initiating a trade.
As a put seller, I am extremely interested in the lower Bollinger Band. The idea is, when a stock is experiencing a pullback and on the bottom range of its volatility channel, this is an indicator that it may be time to sell a put. I also find the Bollinger Band indicator an extremely easy to read and implement indicator as it is a quick visual guide for sizing up a stock chart over time and possible entry points.
Hindsight is 20/20: Johnson and Johnson (NYSE:JNJ) kisses the lower Bollinger Band December 2012, which would have a been a great entry point for put sellers not wanting assignment.
More Information on Put Selling and Bollinger Band Trading Strategies
Teddi Knight has many fantastic articles on Put Selling, and Putting Selling strategies utilizing Bollinger Bands.
Setting Up Alert Preferences
NOTE: Click on the images to enlarge them if you need to see more detail or to make them more clear
You can setup alerts to both and email address and SMS text number, like your iPhone, Android, Windows Phone, or Blackberry.
I choose to receive emails.
To enable the alerts, you need to tell Thinkorswim that you want the alerts and where to send them.
1. To do that, Click the "Setup" button in the upper right hand corner. A menu will pop up, so then click on "Application Settings".
2. This will pop up a box and you will be able to select which options you want. When you choose the email and/or phone number to send alerts to, Thinkorswim will send a confirmation code to the email address and/or device. To enable alerts, you will need to confirm the code before proceeding.
3. Make sure to select the "Alert is triggered" box on the left to receive alerts, and then under the "Alert Settings" section on the right, check how you want alerts. I make sure to have "Send an e-mail checked so I get email alerts. Users that want SMS notifications to their smartphones will want to check either or both of the "Send SMS…" boxes.
Setting Up Bollinger Band Alerts
1. To get to the Alerts Section, click on the "MarketWatch" Tab in the Thinkorswim interface, and then the "Alerts" button to get to the Alerts section.
Close-up of this menu:
2. Now enter the ticker of the stock you want alerts on, hit enter
3. Then click on the "Study Alert" button on the far right
4. This will pop open a box where we can enter our alert. Click the "Add Condition" button on the lower left corner.
Setting up the Upper Bollinger Band
We will start with the Upper Bollinger Band, since this alert is pretty straightforward with default settings.
1. After the "Add Condition" button is clicked, you will get another popup box, where you can choose what type of condition you want to alert on. Bollinger Bands is considered a "Study," so choose the "Study" option from the "Select a Condition" drop down box.
2. Now another box will pop up, with the menu "Lookup a study." From here we want to pick the "BollingerBandsCorssover" study, so click on it.
3. This will popup a few options. We are taking default options, so we do not need to change anything on the left column. However, in the middle column, we do want to choose the "is true" option since we want to be alerted when the upper Bollinger Band is breached.
Click the "Save" button to complete this box.
4. Now our alert box is populated with our condition. The caveat here though, is that once this alert is triggered, it will expire. So, if you want to reuse the alert in the future without having to type it in again, we need to set it to continue even after the condition is met and triggered. So, click the "Set Alert Rules…" button in the lower left hand corner.
5. This will pop up another box. Check the "Recreate alert for reverse crossover" box and then click OK to save this setting.
6. Now click the "Create Alert" button in the lower right corner of the screen to save the alert.
7. You now have an Alert! In the "Market Watch - Alerts" interface section of Thinkorswim, you will now notice an entry under alerts.
Creating the Lower Bollinger Band Alert
The process of creating a lower Bollinger Band alert is very similar, though we do need to tweak a few settings.
1. Click on the "Study Alert" button.
2. We see our condition from the previous alert is still there. Click the "Edit" button on the right side of the screen.
3. This will pop up a box that we recognize. However, in the left column, this time we want to change the "band" and "crossing type" to "lower" and "below," respectively. Then click the "Save" button to save the alert condition.
4. Remember to click the "Set Alert Rules…" button on the lower left of the screen to set the alert to not expire.
5. Again make sure that the "Recreate alert for reverse crossover" box is checked, then click "OK".
6. Then click the "Create Alert" button to save the alert.
7. Congrats, you now have both the Upper and Lower Bollinger Bands being tracked in Thinkorswim !
Adding Additional Stocks to the Alert
This is the method I use, however, if anyone has a quicker way for creating alerts for say, 20 stocks at a time, please let me know. Ultimately I would like to just enter 20 tickers at once and then have the Alert created for them.
1. Go back to the ticker box in the "MarketWatch - Alerts" section on Thinkorswim. Enter the next ticker you want to use, (NYSE:IBM) in this example, and hit enter.
2. Then click the "Study Alert" button on the upper left corner of the interface.
3. Notice our last alert condition is still saved for the lower Bollinger Band. You just need to click the "Set Alert Rules…" button to make the alert permanent again.
4. Confirm the "Recreate alert for reverse crossover" check box is checked and click the "OK" button.
5. Then click the "Create Alert" button.
6. Notice in the "ALERT BOOK" section in the "MarketWatch - Alerts" section, you now have your third alert.
What I would do in the case of 10 stocks, is to keep entering my stock symbols for all 10 stocks and the Lower Bollinger Band, then go back and do all 10 for the Upper Bollinger Band. This minimizes the amount of clicking that you have to do and speeds up the process.
Again if anyone has a faster way for doing this please let me know. In the tech world we call what I'm looking for "batch input" where you can input everything at once instead of manually having to enter them one at a time.
In the upper left hand corner of the Thinkorswim interface, there is a "Support/Chat" button. I have found this button extremely helpful for my alert questions. The support reps are always extremely helpful and have a great demeanor. My experience is that they know the application very well and can find a solution pretty quickly. They are also very honest with what the application can and cannot do.
There are other options platforms out there that may offer better prices, but the customer support I have gotten from TD Ameritrade/Thinkorswim has been great so far and is a major reason why I continue to trade with them.
Thinkscripter also has some pretty amazing Thinkscripts out there to extend the platform.
Best of luck to all you traders out there and I hope you find this of some benefit.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.