Day Trading for a Living (Stock Market Trading and Investing)

by Andrew Aziz

When it comes to low float stocks, the Bull Flag and Fallen Angel Strategies — which I detail in Chapter 6 - work best. The other strategies in this book are not suitable for low float sub-$10 stocks.

Bull flag

Our pre-market Gappers Scanner is set based on the following criteria: Stocks that in the pre-market gapped up or down at least 2% Stocks that have traded at least 100,000 shares by 9 a.m. in the pre-market Stocks that have an average daily volume of over 500,000 shares Stocks that have Average True Range (ATR) of at least 50 cents (how much of a range a stock has on average every day) There is a fundamental catalyst for the stock

Pre market scan

www.trade-ideas.com

Trade idears www

Price range: $1 to $10 The volume today is at least 200,000 shares The float is a maximum of 10,000,000 shares The volume in the last 5 minutes is between 400% and 2,000% of normal The current volume is at least 2 times the normal average volume The 15-minute range is at least $0.30

New high of thE day

1) previous day close or PCL, 2) Y Low, 3) Y High, 4) YY High, 5) YY Low - are that those levels are automatically drawn by your trading platform, and you do not need to look for any of them. They will always be marked on the chart for any stock I choose to look at.

Pricemaker

50 SMA and 200 SMA.

Sma

Figure 6.1 - Gappers watchlist on December 14, 2017 (bottom) and 5-minute chart showing pre-market activity of SMIT (top).

To summarize the strategy: An Angel is a low float Stock in Play which is gapping with heavy volume in the pre-market. At the market Open, our Angel makes a new

Fallan angel

high of the day but sells off quickly. You do not want to jump into the trade yet, not until it consolidates around an important trading level such as the low of the pre-market, or moving averages on your daily or 5-minute chart. This is where our Angel will have fallen to. As soon as the stock is coming back up with heavy volume, that is the place you take the trade to the long side. The entry signal is to see a new 1-minute or 5-minute high after the consolidation with MASSIVE volume only. You must remember that the volume on the way up needs to be significantly higher than previous candlesticks. The stop loss is below the consolidation period. The profit target can be (1) VWAP, (2) the then high of the day, (3) the high of the pre-market, and (4) any other important level nearby such as Y High or Y Low.

If you don’t see an obvious support level and consolidation, do not trade the stock. If you see a breakout but it does not have strong volume, do not trade the stock.

To summarize my trading strategy for the ABCD Pattern: When I find a Stock in Play, either from my Gappers watchlist or from one of my scanners, or when I’m advised by someone in our chatroom that a stock is surging up from point A and reaching a significant new high for the day (point B), I wait to see if the price makes a support higher than point A. I call this point C. I do not jump into the trade right away. I watch the stock during its consolidation period. I choose my share size and stop loss and profit target exit strategy. When I see that the price is holding support at point C, I enter the trade close to the price of point C in anticipation of moving forward to point D or higher. Point C can also be identified from a 1-minute chart. It is important to look at both time frames in order to gain a better insight. My stop is the loss of point C. If the price goes lower than point C, I sell and accept the loss. Therefore, it is important to buy the stock close to point C to minimize the loss. Some traders wait and buy only at point D to ensure that the ABCD Pattern is really working. In my opinion, that approach basically reduces your reward while at the same time increases your risk. If the price moves higher, I sell half of my position at point D, and bring my stop higher to my entry point (break-even). I sell the remaining position as soon as my target hits or I sense that the price is losing steam or that the sellers are acquiring control of the price action. When...

Abcd

To summarize my trading strategy: When I see a stock surging up (either on my

Bull flag

real time New High of the Day Scanner or when advised by someone in our chatroom), I patiently wait until I can identify a clean consolidation period. I do not jump into the trade right away (you will recall that is the dangerous act of “chasing the stock”) because I cannot put a proper stop loss if I am chasing the stock. I watch the stock during the consolidation period. I choose my share size and stop loss and exit strategy. As soon as prices are moving over the high of the consolidation candlesticks, I enter the trade. My stop loss is the break below the consolidation periods. The perfect entry is when both 1-minute and 5-minute charts make a new high at the same time (compared to previous candlesticks). It is therefore important when executing a trade in this strategy to be looking at both charts at the same time. I sell half of my position and take a profit on the way up, usually with a break of the high of

the day. I bring my stop loss from the low of the consolidation period to my entry price (break-even). I sell my remaining positions as soon as my target hits or I sense that the price is losing steam and the sellers are gaining control of the price action. If there is no profit target, you can look at your 1-minute or 5-minute chart and close your position when the price makes a ne...

To summarize my ORB Strategy: After I build my watchlist in the morning, I closely monitor the shortlisted stocks in the first five minutes after the Open. I identify their opening range and their price action. How

Obr

many shares are being traded? Is the stock jumping up and down or does it have a directional upward or downward movement? Is it high volume with large orders only, or are there many orders going through? I prefer stocks that have high volume, but also with numerous different orders being traded. If the stock has traded 1 million shares, but those shares were only ten orders of 100,000 shares each, it is not a liquid stock to trade. Volume alone does not show the liquidity; the number of orders being sent to the exchange is as important. The opening range must be significantly smaller than the stock’s Average True Range (ATR). I have ATR as a column in my Trade Ideas scanner. After the close of the first five minutes of trading, the stock may continue to be traded in that opening range in the next five minutes. But, if I see the stock is breaking the opening range, I enter the trade according to the direction of

the breakout: long for an upward breakout and short for a downward move. My stop loss is a close below VWAP for the long positions and a break above VWAP for the short positions. My profit target is the next important technical level, such as: (1) important intraday daily levels that I identify in the pre-market, (2) moving averages on a daily chart, and/or (3) previous day close. If there was no obvious technical level for the exit and profit target, I exit when a stock shows signs of weakness (if I am long) or strength (if I am short). For example, if the price makes a new 5-minute low, that means weakness, and I consider sell...

As I explained in Chapter 2 about my indicators, I use 9 and 20 Exponential Moving Averages (EMA) and 50 and

Ema and sma

200 Simple Moving Averages (SMA).

The Open tends to last about 30 to 60 minutes (from 9:30 up to 10:30 a.m. New York time). Bull Flag, ORB, ABCD, VWAP Reversals and Fallen Angel tend to be the best strategies for the Open.

Open trends

During the Late-Morning (10:30 a.m. to 12 p.m.), the market is slower but there is still good volatility in the Stocks in Play. This is one of the easiest times of the day for new traders. There is less volume compared to the Open but also less unexpected volatility. A review of my new traders’ trades indicates that they do the worst during the Open and best during the Late-Morning session. Especially excellent risk/reward trades can be expected during this period. VWAP Reversal and VWAP False Breakout tend to be the best strategies for the Late-Morning. I rarely trade Bull Flag in the Late-Morning, Mid-day or at the Close.

Late morning trades

During the Mid-day (12 p.m. to 3 p.m.) the market is

Mid day trades

slower. There is less volume and volatility, but Stocks in Play will often start finding their trend to the upside or downside. VWAP Moving Average Trend and VWAP False Breakout tend to be the best strategies for the Mid-day. Wait to see if the Stocks in Play hold the VWAP or lose it before trading based on the VWAP Moving Average Trend Strategy.

Into the Close (3 to 4 p.m.), stocks are more directional, so I stick with those that are trending up or down in the last hour of the trading day. I raise my tier size from the Mid-day, but not as high as it is at the Open. The daily closing prices tend to reflect the opinion of Wall Street traders on the value of stocks. They watch the markets throughout the day and tend to dominate the last hour of trading. Many of the market professionals take profits at that time to avoid carrying trades overnight. If the stock is moving higher in the last hour, it means the professionals are probably bullish on that stock. If the stock is moving lower in the last hour, the market professionals are probably bearish. It is thus a good idea to trade with the professionals and not against them.

Closing trades

VWAP Moving Average Trend trades tend to be the best strategies for the Close.

Some examples follow this Figure 6.57, which is a summary chart of various trading strategies organized by the time of day that I recommend they be utilized.

Chart day time

Successful day trading is based on these important skills: 1. You need to have the right tools and platforms for trading (Chapter 2). 2. You need to trade the right stock. Trading a stock that is not in play will result in a loss, even for the best traders executing the most proven strategies (Chapter 3). 3. You need to define meaningful support and resistance on your charts before trading, which you can

then use for stop loss and profit target levels (Chapter 4). 4. You need to constantly analyze the balance of power between buyers and sellers and bet on the winning group (Chapter 5). 5. Before taking the trade, you need to define a trading plan and strategy for the trade (Chapter 6). 6. You need to practice excellent money and trade management (Chapter 7). 7. And you need sufficient self-discipline to follow your trading plan, to avoid getting overexcited or depressed in the markets, and to resist the temptation to make emotional decisions.

Rules for a day trader

If you examine the work of most successful traders, you will see that they all take many small losses. Their results are littered with numerous small losses of 7c (cents), 5c, 3c, and even 1c per share. Most good day traders have few losses that are more than 30c per share. Most winning trades should work for you right away.

Avg trade loss

Those who never master this fundamental rule will fail. This is a common problem amongst new traders: they don’t accept a small loss.

Accept small losses