HOW TO DAY TRADE FOR A LIVING SUMMARY (BY ANDREW AZIZ)

Summary

This video script explores the allure and challenges of day trading as a career, emphasizing its flexibility and potential for profitability while acknowledging the steep learning curve and competitive nature. It highlights key takeaways from 'How to Day Trade for a Living' by Andrew Aziz, focusing on strategies like trading 'stocks in play,' adhering to the 2% risk rule, and utilizing candlestick charts for market analysis. The script simplifies complex trading concepts, advocating for support and resistance or VWAP strategies, and encourages mastering one approach before advancing.

Takeaways

• 📈 Day trading is a challenging and competitive profession with a steep learning curve and only a small percentage of traders becoming profitable initially.
• 🌐 Day trading offers the flexibility to work from anywhere with a proper internet connection, including exotic locations like the Bahamas.
• ⏰ The flexibility of day trading allows for a quick wrap-up by 10:00 a.m., leaving the rest of the day free for other activities.
• 💰 Success in day trading can be highly lucrative, but it requires dedication and skill, not just luck or a get-rich-quick scheme.
• 📊 'Stocks in play' are ideal for day trading as they meet criteria like high relative volume, a fundamental catalyst, and independence from market trends.
• 🔍 Traders use scanners to identify 'stocks in play', including pre-market and intraday scanners, to set up trading plans.
• 🛡 The 2% rule emphasizes the importance of risk management, suggesting that traders should risk no more than 2% of their capital on any single trade to ensure long-term survival.
• 📊 Candlestick charts are crucial for day traders to analyze market sentiment and the balance of power between buyers and sellers.
• 📉 Support and resistance levels are fundamental in trading strategies, providing clear entry and exit points for trades based on historical price behavior.
• 🔄 The VWAP (Volume Weighted Average Price) strategy is a key technical indicator for day trading, offering insights into the stock's price trend relative to its trading volume.
• 🚀 Mastering a single, simple trading strategy, such as VWAP or support and resistance, can lead to more focused and effective trading.

Q & A

What is the main appeal of day trading compared to a traditional 9-5 job?

Day trading offers the flexibility to be executed from anywhere with a proper internet connection and allows for a flexible schedule, potentially finishing by 10:00 a.m. and then doing whatever one wants for the rest of the day.

What is the success rate of day traders in their first six months?

Only 16 percent of day traders are profitable after their first six months, indicating a steep and competitive learning curve.

What are 'stocks in play' and why are they important for day traders?

'Stocks in play' are the best stocks for day trading as they fulfill three criteria: high relative volume, a fundamental catalyst, and they trade independently of the market sector they belong to. They are important because they are more liquid and responsive to market movements, making them suitable for day trading strategies.

How does Andrew Aziz find 'stocks in play'?

Andrew Aziz uses scanners to find 'stocks in play', including a pre-market scanner and a real-time intraday scanner to identify potential stocks for day trading.

What is the significance of the 2% rule in day trading?

The 2% rule is a risk management strategy where a trader never risks more than 2% of their total capital in any given trade. This allows for many mistakes while still ensuring survival in the market and the potential for long-term profitability.

Why is understanding candlestick charts important for a day trader?

Candlestick charts are crucial for day traders as they illustrate the balance of power between buyers and sellers, reflecting the underlying market psychology and price fluctuations, which helps in predicting future price movements.

What is the support and resistance strategy in day trading?

The support and resistance strategy involves identifying price points where the stock has historically bounced back (support) or reversed its uptrend (resistance). Day traders use these levels to make decisions on buying or selling, setting stop-losses, and taking profits.

What does VWAP stand for and how is it used in day trading?

VWAP stands for Volume Weighted Average Price, a technical indicator that takes into account the volume of shares traded. It is used in day trading to determine bullish or bearish indications based on whether the stock price is above or below the VWAP.

Why is it recommended to master just one strategy when starting with day trading?

Mastering one strategy allows a trader to focus on the psychological aspects of trading and avoid over-complicating their approach. It helps in building discipline and consistency, which are key to long-term success in day trading.

What does the script suggest about the importance of risk management in day trading?

The script emphasizes the importance of risk management, particularly the 2% rule, to ensure survival in the market and to manage losses effectively, which is crucial given the high failure rate among new day traders.

How can day traders improve their skills and speed up the learning process?

Day traders can improve their skills and speed up the learning process by using trading simulators, studying candlestick charts, mastering simple and efficient strategies like support and resistance or VWAP, and learning from trading books and resources.