Advanced Techniques in Day Trading: A Practical Guide to High Probability Day Trading Strategies and Methods

394 Pages·2018·14.01 MB·English

by  Andrew Aziz

Advanced Techniques in Day Trading

A Practical Guide to High
Probability Strategies and Methods

© Andrew Aziz, Ph.D.
Day Trader at Bear Bull Traders
DISCLAIMER:
The author and www.BearBullTraders.com (“the Company”), including its
employees, contractors, shareholders and affiliates, are NOT an investment
advisory service, a registered investment advisor or a broker-dealer and do not
undertake to advise clients on which securities they should buy or sell for
themselves. It must be understood that a very high degree of risk is involved in
trading securities. The Company, the authors, the publisher and the affiliates of
the Company assume no responsibility or liability for trading and investment
results. Statements on the Company's website and in its publications are made as
of the date stated and are subject to change without notice. It should not be
assumed that the methods, techniques or indicators presented in these products
will be profitable nor that they will not result in losses. In addition, the
indicators, strategies, rules and all other features of the Company's products
(collectively, “the Information”) are provided for informational and educational
purposes only and should not be construed as investment advice. Examples
presented are for educational purposes only. Accordingly, readers should not
rely solely on the Information in making any trades or investments. Rather, they
should use the Information only as a starting point for doing additional
independent research in order to allow them to form their own opinions
regarding trading and investments. Investors and traders must always consult
with their licensed financial advisors and tax advisors to determine the suitability
of any investment.
Table of Contents
Chapter 1: Introduction
About this Book
My Trading Style
Day Trading as a Probability Business
How this Book is Organized
Chapter 2: The Trading Tools and Platform
Choosing a Broker
Trading Platform
Top List
Market View
Montage Nasdaq Level 2
Buy and Sell Orders
Default Style
Stop Style
Stop Market
Stop Limit
Trailing Stop
Stop Range
Hotkeys
Short Selling Restriction
Real Time Market Data
Nasdaq Level 2 and Bid-Ask
Chapter 3: Building Your Trading Watchlist
Stocks in Play
Float and Market Cap
Pre-Market Gappers
Real Time Intraday Scans
Planning the Trade Based on Scanners
Chapter 4: Support and Resistance Levels
Introduction
What are Support and Resistance Levels?
Finding Support and Resistance Levels
Chapter 5: Price Action, Candlesticks and Trade Management
Price Action and Mass Psychology
Bullish and Bearish Candlesticks
Indecision Candlesticks
Candlestick Patterns
Trade Management Based on Price Action
Position Sizing
Understanding Nasdaq Level 2 Signals
Chapter 6: Advanced Day Trading Strategies
Strategy 1: Fallen Angel
Strategy 2: ABCD Pattern / Reverse ABCD Pattern
Strategy 3: Bull Flag / Bear Flag
Strategy 4: Opening Range Breakout
Strategy 5: VWAP Trading
One Stock in Play, All Strategies
Other Trading Strategies
Develop Trading Skills, Not Strategy
Chapter 7: Risk and Account Management
Don’t Change a Day Trade to a Swing Trade
Risk Management
Position Sizing
Chapter 8: Conclusion and Final Words
Final Words
Glossary
Chapter 1:
Introduction
About this Book
This publication can be regarded as a sequel to my first book, How to Day Trade
for a Living: A Beginner’s Guide to Tools and Tactics, Money Management,
Discipline and Trading Psychology.
In that first book, I explained the fundamentals of day trading and how day
trading is different from other styles of trading and investing. In the process, I
also described important trading strategies that many traders use each day.
Although I sense my first book well-served many new traders, I know it left
many more experienced traders looking for a more detailed guide. There was a
sacrifice I had to make in writing the first book. That book was intended to be
for beginners, and I had to make a choice between a detailed and very likely
overwhelming guide, or a simpler guide that was aimed for the novice trader.
After much thought, I decided to review the entire day trading process, but not in
significant detail. For example, I wrote about strategies and scanners, but I did
not dive into the technical parameters of scanners that often leave new traders
terrified and lost. I wanted to establish important and vital fundamentals and
overview the most important strategies which need to be mastered. This, my
second book, utilizes those fundamentals and strategies as a launching pad to
explain some of the more advanced strategies and methods involved in day
trading.
If you have read the first book (How to Day Trade for a Living), then Advanced
Techniques in Day Trading will serve as a reminder, or a kind of refresher
course on the basics, with a deeper dive into the technical. If you have not yet
read How to Day Trade for a Living, I think you will find this publication’s
somewhat condensed version of that basic information easy to understand as it
then introduces you to more advanced techniques. To maximize your learning
experiences, however, I recommend reading (and then regularly re-reading and
consulting) both books. I believe you will find them to be useful guides and
references at all stages of your career as a trader. And don’t just strictly study my
books. There are many excellent resources out there. A successful day trader is
definitely a lifelong learner.
Intermediate traders may benefit from the first book’s overview of some of the
classic strategies that the majority of retail traders use effectively. If you don’t
consider yourself a novice trader, then you may wish to jump ahead and start
reading (or re-reading) at Chapter 7 for an overview of the most important day
trading strategies. However, I encourage you to skim through the earlier chapters
as well. Becoming a consistently profitable trader will not require you to master
complicated new trading strategies every day. The strategies in Chapter 7 of
How to Day Trade for a Living are the ones that traders have used for over a
decade. They have worked thus far and really do need to be mastered. Work on
simple and well-known strategies, but adjust them over time to complement your
own personality and whatever the current market conditions are. Success in
trading is not a revolution; it is an evolution.
Whether you are a novice trader or one with some experience, these books can
equip you with an understanding of where to start, how to start, what to expect
from day trading, and how you can develop your own strategy. Simply reading
books will, of course, not make you a profitable trader. Profits in trading do not
come from reading one or two, or even a dozen books, but, as I explain, profits
can come with practice, the right tools and software, and proper ongoing
education.
While I tried to avoid repetition, I must confess to traders who read my first
book, some parts may seem redundant or repetitive. Again, a hard choice and a
sacrifice had to be made. I want this book to be the addition to the first book, but
still this book needs to stand alone and be coherent for anyone who is new to day
trading or has not read the first book yet. Therefore, I apologize in advance if
you find some parts repetitive. You may want to skim through those sections
faster.
My Trading Style
There are two styles of trading: discretionary and mechanical systems based.
Discretionary traders evaluate potential trades based on their trading plan, using
technical analysis to determine if each trade meets their requirements. Although
the discretionary trader’s rules are known, the trader decides to take or pass on
trades based on their experience. The discretionary trader doesn’t follow a firm
algorithm of entries and exits. Instead, they weigh all available information, and
then make a call.
Mechanical systems, on the other hand, are trading strategies that a computer
program can execute. The mechanical system is often based on technical inputs
such as price and indicators. The strategies are usually programmed into a
computer software program that can backtest them on historical market data to
determine if they produce positive expectancy: namely, if they produce higher
profits than losses over the long term and in comparison to the overall market.
Rarely does a trader need to make a decision when using mechanical systems.
Institutional trading, high frequency trading and algorithms are all examples of
mechanical systems based trading. There are many firms, educators, traders and
even online scammers who develop these types of computer programs and
systems and sell them to traders.
The two approaches both have advantages and disadvantages: discretionary
trading offers a fresh look at each trading opportunity and lets the trader pass on
trades when information that may not be easily captured in a computer program
indicates a decreased chance of success. However, because the discretionary
trader must make a decision for each trade, traders are more prone to emotional
trading and acts of self-deception, such as falling in love with a trade, that will
often result in a failure to follow their trading plan.
Mechanical trading, on the other hand, largely takes the trader’s decision-making
process out of the equation. A computer algorithm executes the trades as
programmed. The only input on the trader’s part is the amount of capital devoted
to each trade. The trader just determines the share size, and after that the trader
can step back and watch the computer work its magic. But mechanical trading
systems also have their drawbacks. Can a system be designed to capture all
contingencies or possibilities that may arise? I don’t believe so. And when losses
occur, the mechanical trader must determine whether the loss is a temporary part