Mastering thinkorswim: Create Custom Indicators and Scans for Your Trading Strategy

Introduction

In this article, I will guide you through the process of using TD Ameritrade's thinkorswim desktop platform to implement custom trading strategies. Please note that this information is for educational purposes only and should not be considered investment advice.

Setting Up Custom Indicators in thinkorswim

To begin, we will add custom indicators to our thinkorswim chart. Let's start with the Bollinger Bands indicator:

1. Click on "Edit Studies" in the top panel of the thinkorswim platform.
2. Add the Bollinger Bands indicator and adjust the settings. For example, you may want to use a 30-period Bollinger Band and color the upper and lower bands yellow.
3. Next, add the Relative Strength Index (RSI) indicator using a 13-period setting. Set the overbought condition at 75 and the oversold condition at 25.
4. Finally, add the Bollinger Bandwidth indicator using the same length as the Bollinger Bands (30 periods). Note that the Bollinger bandwidth in thinkorswim is multiplied by 100, unlike in the trading strategy video where it was set with thresholds like 0.1 or 0.2.

Now that we have all the necessary indicators on our chart, we can proceed to set up custom scans to identify symbols that meet our strategy criteria.

Creating Custom Scans in thinkorswim

With thinkorswim's scan feature, we can easily find symbols that match our trading strategy criteria. Let's walk through the process:

1. Click on the "Scan" tab in the thinkorswim platform.
2. Add filters based on your strategy rules. For example, you may want to scan for symbols with a green candle that closes higher than the open of the previous candle. You can also add conditions for RSI and Bollinger Band criteria.
3. Save your scan with a name for future reference.
4. Optionally, you can set up alerts to be notified when a symbol is added or removed from the scan results.

By using the scan feature, you can quickly identify symbols that meet your strategy criteria, such as the Russell 3000, and review their charts to determine potential trading opportunities.

Customizing Indicators and Studies in thinkorswim

While TD Ameritrade provides default indicators and studies, you may want to customize them to fit your specific needs. Here's how you can create your own custom study for the Bollinger Bandwidth indicator:

1. Remove the default Bollinger Bandwidth from the chart.
2. Create a new study by clicking on "Create a New Study" in the thinkorswim platform.
3. Define the code for your custom study, such as Bollinger Bandwidth. You can adjust parameters like the length of the Bollinger Bands and the threshold for the bandwidth.
4. Save and apply your custom study to the chart.

By creating your own custom studies, you can tailor the indicators to match your preferred calculations and visualizations.

Adding Profit Targets and Stop Loss Levels to the Chart

To make it easier to set profit targets and stop loss levels for your trading strategy, you can add bands to the chart that indicate the desired levels. Here's how you can set this up using thinkorswim:

1. Create a new upper study and name it, for example, "ATR Bands."
2. Define the parameters for the upper and lower bands, such as the multiplier for the average true range (ATR) and the gaps between the opening price and the profit target/stop loss levels.
3. Plot the upper and lower bands using the calculated values.
4. Adjust the color and appearance of the bands for better visibility on the chart.

By visualizing the profit targets and stop loss levels on the chart, you can easily determine the potential risk and reward for each trade.

Summary of Article

This article provides a comprehensive guide to creating and customizing indicators and scans in thinkorswim to implement your trading strategies. By adding custom indicators, setting up scans, and customizing studies, you can tailor the thinkorswim desktop platform to meet your specific trading needs.

Keywords: TD Ameritrade, thinkorswim, trading strategies, custom indicators, custom scans, Bollinger Bands, RSI, Bollinger Bandwidth, profit targets, stop loss levels.

FAQ

Q: What is thinkorswim? A: thinkorswim is a desktop trading platform offered by TD Ameritrade that provides advanced charting, scanning, and trading tools for active traders.

Q: Can I customize the indicators in thinkorswim? A: Yes, you can customize the indicators in thinkorswim to match your preferred settings and calculations.

Q: How can I set up custom scans in thinkorswim? A: You can use thinkorswim's scan feature to create custom scans by adding filters based on your trading strategy rules.

Q: Can I add profit targets and stop loss levels to the chart in thinkorswim? A: Yes, you can add bands to the chart in thinkorswim to indicate profit targets and stop loss levels for your trading strategy.

Q: Is thinkorswim suitable for beginner traders? A: While thinkorswim offers advanced features, it may not be suitable for beginner traders. It is recommended to familiarize yourself with basic trading concepts before using thinkorswim.