day strategies & risk management - bearbulltraders.com · copyrighted material: andrew aziz (c)...
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Day Strategies& Risk Management
ANDREW AZIZ
SESSION 4
COPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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DisclaimerBearBullTraders.com employees, contractors, shareholders and affiliates, are NOT an investment advisory service,
a registered investment advisor or a broker-dealer and does not undertake to advise clients on which securities
they should buy or sell for themselves.
You understand that NO content published as part of the BearBullTraders Room and its Website constitutes a
recommendation that any particular investment, security, portfolio of securities, transaction or investment
strategy is suitable for any specific person.
You further understand that none of the creators or providers of our Services or their affiliates will advise you
personally concerning the nature, potential, value or suitability of any particular investment, security, portfolio of
securities, transaction, investment strategy or other matter.
COPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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Class 1: Before Start Trading◦ Trading Platform
Class 2: Before Market Opens◦ Finding the Stocks in Play
◦ Finding Trading Levels
Class 3: Technical◦ Orders: Market, Limit, Marketable limit
◦ Understanding Level 2
◦ Price Action
◦ Trade Management
Class 4: Trading Strategies ◦ Strategies
◦ Risk Management
Class 5: Low Float Stocks (from May 2018)
Class Overview
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Class 4: Strategies
Strategies
1. ABCD Pattern / Reverse ABCD Pattern
2. VWAP Trading
1. VWAP Reversals
2. VWAP False Breakout
3. VWAP Trend Trades
3. Opening Range Breakdown (ORB)
What is a Successful Strategy?
Risk Management
COPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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Float and Market CapFloat Price Range
Low float(less than 20 million)
Under $10 (stay away from them)
Medium float(20-500 million)
$10-$100 (my favorite!)
Large float(+500 million)
Any (usually +$20)
Trading stocks with different floats is the MAIN reason of inconsistency among traders!!
COPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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All of Class 4 strategies are for mid-to-high float stocksClass 5, talks about low-float stocks.
COPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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Day Trading StrategyABCD Pattern
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A
B
C
D
C
D
A
B
C
D
VWAPVWAP
Long
Sold someSold break-even
Potential entry
Potential entry
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Reverse ABCD Pattern for Short Selling
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VWAP: DefinitionVWAP is an important number to institutional traders at the end of day. Managers compare traders
average filled price vs. VWAP.
◦ Big sellers want to have avg. price above VWAP
◦ Big buyers want to have avg. price below VWAP
Therefore:
Institutional traders want to sell above VWAP: price comes down to VWAP
Institutional traders want to buy below VWAP: price moves up to VWAP
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VWAP: the most important day trading indicatorshows market sentiment: who is in control of the price.
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VWAP Trading
Stocks in Play respect VWAP, and they test VWAP at least once.
Most of the time you get a second chance (don’t feel you are missing out).
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How to use VWAP for tradinga. The most important support or resistance level
Powerful profit target or stop loss for other strategies
b. Strategies:
1. VWAP Reversal at the Open (Brian’s double bottom!)
2. VWAP False Breakouts (~10:00 am -12:00 pm)
3. VWAP Trend Trade: loss or hold of VWAP (usually after ~10:30 am)
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1. VWAP Reversals at the OpenWhen Stock can not make a New Low: Possible Long to VWAP and Above
When Stock can not make a new 5 min high: Possible short to VWAP and below
This could be after the 5 min Opening Range Breakup/down
This could happened by failing of ABCD/Reverse ABCD Pattern
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Low of pre-market
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AWLAY look for a good risk:rewards
Is this reversal a good risk:reward?
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False breakouts, can not establish a trend above
2. VWAP False BreakoutsMost VWAP trades should start a trend after. If they do not, they are likely false breakouts.
Go short
Trend Established after VWAP
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False breakouts, can not establish a trend higher
2. VWAP False BreakoutsMost VWAP trades should start a trend after. If they do not, they are likely false breakouts.
Go short
Trend Established after VWAP
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False breakout, can not move higher
lost VWAP
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May 12 2017 JWN VWAP False BreakOut
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May 17 2017 TGT False Breakout
VWAP False Breakout?
?
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May 15 2017 IONS False VWAP BreakOut
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And yes, sometimes false breakouts do not work! Better to wait for next 5 min for confirmation.
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3. VWAP Trend Trade after VWAP Hold or Loss
Stocks in Play usually either hold or lose VWAP after the Open, that is the time to go after them!
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Trend after VWAP Hold or Loss
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Opening Range Breakouts Strategy
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Opening Range Breakouts StrategyOpening range should be lower than ATR
◦ Wild opening ranges are not good (too much volatility at Open = HFT or institutional trading)
ORB is an entry signal ONLY.
Stop loss: I usually use loss or break of VWAP.
Profit target: technical levels such as◦ low of the day
◦ Next important level
◦ moving averages nearby
◦ Previous day close
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Opening Range Breakouts Strategy
Opening range breakout is from the body of candlestick, not the wicks.
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Opening Range Breakouts StrategyOpening range breakout in volatile opening
ORB
Breakout!
This example is a bad ORB, because ORB is too wildand as you see, it probably won’t not work out!
Could not make a low!
Stop out
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ORB can take up to 1 hr to happen.
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ORB WATT December 27 2017
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Another ORB Example: Use 1 min to get a better entry.
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Another ORB Example: Use 1 min to get a better entry.
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A successful trade is the combination of EVERYTHING you learned so far:
It is a fast decision making process! And yes it is hard!
1. Stock in Play: Correct stock to trade (Class 2)
2. Price Action: Balance of Power Between Buyers and Sellers (Class 3)
3. Levels: Support / Resistance Levels (Class 2)
4. Technical Strategies: VWAP, Reversal, Moving Average (Class 4)
5. Risk Management: Proper size, and stop loss
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Trade OverviewWalking through a trade thought process….
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Walking through a trade thought process….
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Trade that I took….
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What happened? And how?
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Open
ORB
ABCD
Bull Flag
Fallen Angel
Late Morning
Reversals
False Breakouts
Red-to-Green
Mid Day - to Close
VWAP Trend
Moving Average
Reversals
Stock in Play
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One Stock in Play:Many Strategies
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May 12 2017
ORB
VWAP ReversalsVWAP false breakout
VWAP loss
One Stock in Play: all strategies!
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May 15 2017
ORB
VWAP false breakout
VWAP loss
One Stock in Play: all strategies!
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Risk Management: Risk : Reward
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Risk Management: Risk:Reward
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Example of a Bad Risk:Reward Trade
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Real time Risk:Reward Analysis
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Squeeze to Moving Average: Risk to Reward Analysis
Profit Target
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Risk:Reward Analysis on 1 min vs 5-min Chart
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Real Time Risk:Reward Analysis
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Real Time Risk:Reward Analysis
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Chasing Stock: Bad Risk RewardGood trading idea, bad execution.
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1% Rule: shark biteDo not risk more than 1% of your account on any single trade
Your account size: $40,000
1. 1% rule: $400
2. Reasonable Stop loss: 40 cent per share
3. Share size: 400/0.4 = 1,000 share max.
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6% Rule: Piranha bite
You are NOT allowed to lose more than 6% of your account in the last 30 days.
If you are down more than 6% in the last 30 days, you should switch to simulator for 2 weeks.
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6% Rule:being eaten slowlyby series of small losses
1% Rule:losing a leg or handin one trade
Credit of Concept: Dr. Alexender Elder, Trading for a Living bookCOPYRIGHTED MATERIAL: ANDREW AZIZ (C) WWW.BEARBULLTRADERS.COM
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Position Sizing for BeginnersStart small: Don’t worry about commissions just worry about learning to trade the strategy and
follow the process
Manage losing streaks. reduce the size when your account is dropping. Avoiding the “gambler’s
fallacy.”
Ignore time-based profit goals (ignore $200/day or $1000/week)
Find your strategy: low-float vs mid-float?
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Good luck!
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