Advanced Techniques in Day Trading - Extended Summary

Author: Andrew Aziz | Categories: Day Trading, Technical Analysis, Beginners

About This Summary

This is a PhD-level extended summary covering all key concepts, frameworks, and strategies from Andrew Aziz's advanced follow-up to How to Day Trade for a Living. This summary synthesizes the book's advanced chart patterns, VWAP strategies, order flow techniques, and professional-grade risk management into a cohesive reference guide. It is designed for traders who have mastered the basics and are ready to refine their edge with institutional-grade methods.

Executive Overview

Advanced Techniques in Day Trading picks up where Aziz's first book left off, moving beyond foundational concepts into the nuanced territory of professional day trading. The book assumes you already understand basic candlestick patterns, support and resistance, and elementary risk management. It then layers on advanced pattern recognition, order flow analysis through Level 2 data, and the psychological resilience required to trade consistently at a higher level.

The book is structured around the idea that profitability in day trading comes not from knowing more setups, but from executing fewer, higher-quality trades with superior risk management. Aziz emphasizes that the difference between a struggling trader and a consistently profitable one is rarely the strategy itself but rather the discipline in trade selection, position sizing, and emotional regulation. He draws from his own trading journal and the Bear Bull Traders community to provide dozens of annotated real-trade examples.

A central theme throughout is the concept of "trading like a business." Aziz pushes readers to develop a formal business plan, maintain meticulous records, and treat every trading day as a professional engagement rather than a gambling session. The advanced techniques presented are tools in service of this larger professional framework.

Part I: Advanced Chart Patterns

The ABCD Pattern - Advanced Application

The ABCD pattern is the foundation upon which nearly every other advanced pattern is built. In its simplest form, the pattern consists of four price points: A (the initial move start), B (the first pullback), C (the resumption), and D (the completion target). What Aziz adds in this advanced treatment is the concept of pattern quality grading and context filtering.

Not all ABCD patterns are created equal. Aziz introduces a grading system:

Key Insight: The ABCD pattern is not a standalone signal. Its power comes from confluence - when it aligns with VWAP, a key support/resistance level, and sector momentum, the probability of success increases dramatically.

Aziz stresses that traders should only take A+ and A grade setups. The temptation to trade B and C grade patterns is what erodes profitability over time. He recommends maintaining a "pattern quality log" where you grade each setup before entering, then review the correlation between grades and outcomes weekly.

Bull Flag Pattern - Professional Execution

The bull flag is one of the most reliable continuation patterns in day trading, but Aziz reveals that most traders misidentify and mis-time their entries. A true bull flag requires:

1. A strong initial move (the "pole") on high volume, ideally 2x or more the average volume
2. A consolidation period (the "flag") with declining volume and a slight downward drift
3. A breakout above the flag's upper boundary on renewed volume

The advanced technique Aziz teaches is the "anticipatory entry" versus the "confirmation entry." The anticipatory entry involves buying near the bottom of the flag consolidation, using the lower boundary of the flag as your stop loss. The confirmation entry waits for the breakout above the flag. Each has tradeoffs:

VWAP Reversals - The Institutional Pattern

The VWAP reversal is perhaps the most important pattern in the book because it directly exploits institutional order flow. Large institutions use VWAP as a benchmark for their execution algorithms. When price approaches VWAP from below after a sell-off, institutional buy programs often activate, creating a natural floor.

Aziz outlines the VWAP reversal setup in five steps:

1. Pre-condition: Stock must have gapped down or sold off significantly from the open
2. Approach: Price approaches VWAP from below with decreasing selling momentum (visible in volume decline)
3. Test: Price touches or slightly overshoots VWAP, then pulls back
4. Confirmation: A bullish candle forms at or near VWAP with increasing volume
5. Entry: Buy on the close of the confirmation candle with a stop below the candle's low

The critical nuance is distinguishing between a VWAP reversal and a VWAP rejection. In a rejection, price hits VWAP and immediately reverses downward with force. This typically happens when the broader market is weak or the stock has a fundamental catalyst driving it lower. Aziz provides a checklist to differentiate:

• Is the broader market (SPY) trending upward or sideways? (Favors reversal)
• Is the selling volume declining on the approach to VWAP? (Favors reversal)
• Is the stock's relative volume above 1.5x average? (Needed for reversal)
• Are there no pending negative catalysts (earnings, FDA decisions)? (Favors reversal)
• Is the stock in a sector showing relative strength today? (Favors reversal)

Opening Range Breakout (ORB) - The First 15 Minutes

The opening range breakout strategy exploits the volatility and volume surge that characterizes the first 5-15 minutes of the trading day. Aziz defines the "opening range" as the high and low established in the first 5 minutes (aggressive) or 15 minutes (conservative) after the market opens at 9:30 AM EST.

The strategy is straightforward in concept: buy a breakout above the opening range high, or short a breakdown below the opening range low. But the execution requires precision:

Long ORB Setup:

1. Wait for the first 5 or 15 minutes to establish the range
2. Identify the high and low of that range
3. Set an alert at the high of the range
4. When price breaks above, wait for a 1-minute candle to close above the range
5. Enter on the next candle with a stop loss at the midpoint of the opening range
6. Target: 1.5x to 2x the opening range height

Filters for Higher Probability ORBs:

Key Insight: The opening range breakout is one of the few strategies where the first trade of the day is often the best. Aziz cautions against "revenge trading" a failed ORB by immediately trying the opposite direction.

Practical Application: Pattern Confluence Trading

The most powerful concept in Part I is not any single pattern but the idea of confluence. Aziz recommends creating a "confluence score" for each potential trade:

• ABCD pattern present: +1 point
• At or near VWAP: +1 point
• High relative volume (2x+): +1 point
• Sector showing relative strength/weakness in your direction: +1 point
• Key support/resistance level aligns: +1 point
• Moving average (9 EMA or 20 EMA) provides dynamic support: +1 point

Minimum confluence score to trade: 3 points. Four or more points represent high-conviction setups where position size can be increased.

Part II: VWAP Trading Strategies

Understanding VWAP at a Deeper Level

Volume Weighted Average Price (VWAP) is not merely a technical indicator. It represents the average price that institutions have paid for a stock throughout the day, weighted by volume. This makes it the single most important intraday level because institutional algorithms actively use it as a benchmark.

Aziz explains three core VWAP strategies:

VWAP Hold Strategy

The VWAP Hold is a trend continuation strategy. When a stock is trending above VWAP and pulls back to touch it, the VWAP often acts as dynamic support. Institutional algorithms that are executing buy programs will add to positions at or near VWAP, creating buying pressure.

Setup Requirements:

1. Stock is in an uptrend (above VWAP since the open or after reclaiming it)
2. Price pulls back to VWAP on declining volume
3. A bullish candle forms at VWAP (hammer, engulfing, or doji followed by green candle)
4. Enter long with a stop loss 10-15 cents below VWAP
5. Target: Previous high of day or the next technical resistance level

The mirror image works for short trades when a stock is trending below VWAP.

VWAP False Breakout Strategy

This is Aziz's most nuanced VWAP strategy. A false breakout occurs when price briefly crosses VWAP but fails to hold above (or below) it and snaps back. This traps traders who entered on the breakout and creates a cascade of stop-loss orders that you can ride.

Identification Checklist:

• Price has been below VWAP for most of the session
• A weak attempt to cross above VWAP occurs (low volume, small candles)
• Price closes back below VWAP within 1-3 candles
• Volume increases on the move back below VWAP (trapped buyers exiting)
• Short entry: Below the low of the candle that failed above VWAP
• Stop loss: Above the high of the false breakout
• Target: Previous low of day or next support level

VWAP Strategy Comparison Framework

Key Insight: The VWAP false breakout has the highest win rate because it trades against trapped participants. The emotional pressure on those caught on the wrong side creates predictable, mechanical stop-running that you can anticipate.

Part III: Level 2 and Order Flow Analysis

Reading the Order Book

Level 2 data shows the actual bids and offers queued at each price level. Most retail traders only see Level 1 data (best bid and best ask). Level 2 reveals the depth of the market, showing how many shares are available at each price.

Aziz teaches traders to look for three key signals in Level 2:

1. Large Resting Orders (Walls) When a disproportionately large order sits at a specific price (e.g., 50,000 shares at $25.00 when the average level shows 500-2,000 shares), this acts as a "wall." These walls can be support (large bid) or resistance (large ask).

2. Order Flow Imbalance When the total shares on the bid side significantly outweigh the ask side (or vice versa), it signals directional pressure. Aziz suggests a 3:1 ratio as significant.

3. Spoofing and Flipping Large orders that appear and disappear rapidly are "spoof" orders designed to manipulate perception. Aziz teaches how to identify these by watching how quickly large orders are pulled when price approaches them. If a 50,000 share bid at $25.00 disappears when the price drops to $25.01, it was likely a spoof.

Time and Sales (The Tape)

The time and sales window shows every transaction as it happens. Aziz focuses on:

Practical Application: Combining Level 2 with Chart Patterns

Aziz's most valuable contribution in this section is the integration framework. He does not treat Level 2 as a standalone strategy but as a confirmation tool layered on top of chart pattern analysis.

Decision Process:

1. Identify a chart pattern setup (e.g., bull flag near VWAP)
2. Check Level 2 for supporting evidence (bid-side strength, no large resistance walls at target)
3. Watch time and sales for aggressive buying activity
4. If all three align: Execute the trade
5. If Level 2 contradicts the chart pattern: Skip the trade

Part IV: Advanced Risk Management

Position Sizing Models

Aziz moves beyond the basic "risk 1% per trade" rule and introduces a tiered position sizing model based on setup quality:

Scaling In and Scaling Out

Scaling is the practice of entering or exiting a position in multiple tranches rather than all at once. Aziz presents two scaling models:

Scaling In (Pyramiding):

• Take 50% of your intended position at the initial entry
• Add 25% when price confirms in your direction (breaks a key level, forms continuation candle)
• Add the final 25% on a second confirmation
• Move stop loss to breakeven after the second add

Scaling Out (Profit Taking):

• Sell 1/3 at the first target (typically 1:1 risk/reward)
• Sell 1/3 at the second target (2:1 risk/reward)
• Trail the remaining 1/3 with a moving average or candle-by-candle stop

Maximum Daily Loss Rules

This is the section that separates professionals from amateurs. Aziz is emphatic that every trader must have a hard daily loss limit that, when hit, ends the trading day immediately.

Aziz's Recommended Daily Loss Framework:

Key Insight: The "2 consecutive losses" rule is psychologically critical. After two losses in a row, your judgment is compromised. One more attempt is allowed because the third trade might genuinely be a good setup that was unavailable earlier. But if that also fails, the day is over. No exceptions.

Risk Management Checklist (Pre-Trade)

• Have I defined my exact entry price?
• Have I defined my stop loss price before entering?
• Is my position size calculated based on the setup quality grade?
• Is my risk/reward ratio at least 2:1?
• Am I within my daily loss limit if this trade fails?
• Have I checked the overall market direction (SPY/QQQ)?
• Is there a major economic event or earnings report pending?
• Am I trading within my designated hours (avoid lunch hour)?

Part V: Pre-Market Analysis and Watchlist Building

The Pre-Market Routine

Aziz structures his pre-market routine into three phases:

Phase 1: Market Context (6:00-7:00 AM EST)

• Review overnight futures, particularly S&P 500 and Nasdaq
• Check economic calendar for scheduled data releases (jobs report, CPI, FOMC)
• Scan international markets (Europe, Asia) for any significant moves
• Review any sector-specific news

Phase 2: Stock Scanning (7:00-8:30 AM EST)

• Run gap scanners to identify stocks gapping up or down 3%+ on volume
• Filter for stocks priced $5-$150 (Aziz's preferred range)
• Require minimum pre-market volume of 100,000 shares
• Check the catalyst: earnings, FDA approval, analyst upgrade/downgrade, sector news
• Narrow list to 3-5 candidates maximum

Phase 3: Trade Planning (8:30-9:30 AM EST)

• Draw key support/resistance levels on each watchlist stock
• Identify VWAP from previous day's close (as a reference)
• Mark the pre-market high and low
• Define specific setups you will look for on each stock
• Write out exact entry, stop, and target for each potential trade

Scanner Configuration

Real-Time Screening Criteria

During market hours, Aziz recommends monitoring a "hot list" that automatically ranks stocks by:

1. Relative volume: Stocks trading at 3x or more their average volume
2. Price change percentage: Sorted by biggest movers
3. Float turnover: Percentage of the float that has traded (higher = more interest)
4. Spread tightness: Bid-ask spread under $0.05 (ensures liquidity for clean entries/exits)

Part VI: Trading Psychology at the Advanced Level

The Psychology of Consistency

Aziz argues that at the advanced level, psychology is 80% of the game. The patterns and strategies work, but the trader's ability to execute them consistently is what determines profitability. He identifies five psychological traps that advanced traders face:

1. Overconfidence After Winning Streaks After 5-10 consecutive winning trades, traders begin to size up aggressively, skip their checklist, and take lower-quality setups. Aziz prescribes a "success protocol": after every winning week, reduce position size by 20% for the following Monday. This counterintuitive step prevents the inevitable blow-up that follows overconfidence.

2. Revenge Trading Taking a trade specifically to "get back" at the market after a loss. Aziz's rule: after any loss exceeding your normal risk parameters, take a 15-minute break away from the screen. Walk, stretch, or journal. Return only when you can articulate a new, independent trade idea.

3. FOMO (Fear of Missing Out) Chasing a stock that has already made its move. Aziz notes that FOMO trades have the worst risk/reward profile because you are buying at elevated prices with wide stops. His antidote: "The market will be here tomorrow. There will always be another setup."

4. Analysis Paralysis Having so many indicators and filters that you never actually execute. Aziz recommends limiting your screen to: price candles, VWAP, 9 EMA, 20 EMA, volume, and Level 2. Nothing else.

5. Outcome Bias Judging a trade by whether it made money rather than whether the process was correct. A trade that violated your rules but happened to profit is a bad trade. A trade that followed your rules perfectly but hit the stop loss is a good trade.

The Trading Journal Framework

Aziz provides a specific journaling template:

Part VII: Multi-Day Swing Setups from Day Trades

When Day Trades Become Swing Trades

One of the most practical sections of the book addresses a common scenario: you enter a day trade that moves strongly in your favor and has room to run beyond the current session. Aziz provides a framework for converting day trades to swing holds:

Criteria for Holding Overnight:

1. The stock closed at or near the high of day (within 5%)
2. Volume was at least 3x average for the day
3. The catalyst has multi-day significance (earnings beat, major contract, FDA approval)
4. The sector is in a bullish trend
5. You can reduce your position to 50% or less of the day trade size

Risk Management for Swing Holds:

• Move stop loss to the low of the last 30-minute candle
• Reduce position to account for overnight gap risk
• Set a hard mental stop at -3% from closing price (will exit at market open if gapped below)
• Re-evaluate the position in the first 15 minutes of the next session

Sector Rotation and Relative Strength

Aziz dedicates significant attention to the concept of sector rotation - the phenomenon where institutional money flows from one sector to another based on the economic cycle, interest rate expectations, and market sentiment.

How to Apply Sector Rotation to Day Trading:

Relative Strength Application: Within a single trading day, Aziz recommends identifying which sectors are outperforming SPY. Then, within those sectors, find the individual stocks showing the most relative strength. These are your primary long candidates. The reverse applies for shorts.

Part VIII: Real Trade Examples

Annotated Trade Example 1: AMD Bull Flag with VWAP Confirmation

Context: AMD gapped up 4% on a positive analyst upgrade. Pre-market volume was 2M shares.

Setup: By 9:45 AM, AMD had formed a clean ABCD pattern from the open. At 10:05, a bull flag began forming just above VWAP. The flag consolidated for 12 minutes with declining volume.

Entry: $78.45, just above the flag's upper boundary, as the breakout candle closed on 2x volume.

Stop: $78.10 (below the flag's lower boundary and below VWAP). Risk = $0.35/share.

Target: $79.25 (previous day's high and measured move from the flag). Reward = $0.80/share. Risk/reward = 2.3:1.

Quality Grade: A+ (VWAP support, sector strength in semis, high relative volume, clean pattern, analyst catalyst)

Outcome: AMD broke out to $79.40, exceeding the target. 1/3 was sold at $79.00, 1/3 at $79.25, and 1/3 was trailed with the 9 EMA and exited at $79.10 when the candle closed below.

Net P&L per share: Average exit $79.12 minus entry $78.45 = $0.67/share profit.

Annotated Trade Example 2: Failed VWAP Reclaim Short

Context: NFLX gapped down 3% on subscriber growth concerns. VWAP from previous day close was at $415.

Setup: By 10:15 AM, NFLX attempted to reclaim VWAP, pushing from $410 up to $415.20. However, volume on the push was declining, and Level 2 showed a massive sell wall at $415.50 (200,000 shares).

Entry: $414.60 short, after the candle closed back below VWAP on increasing sell-side volume.

Stop: $415.50 (above the false breakout high). Risk = $0.90/share.

Target: $412.00 (morning low). Reward = $2.60/share. Risk/reward = 2.9:1.

Quality Grade: A (VWAP false breakout, high volume, Level 2 confirmation, but broader market was flat rather than bearish)

Outcome: NFLX sold off to $411.80, hitting the target. All three exits were at the target.

Visual Framework: The Complete Trade Decision Process

Decision Flowchart: Should I Take This Trade?

START: Pattern Identified
  |
  v
Is the stock on my watchlist?
  |-- NO --> Is there an extraordinary catalyst?
  |            |-- NO --> PASS on trade
  |            |-- YES --> Continue with caution
  |-- YES --> Continue
  |
  v
What is the confluence score? (Count: ABCD/pattern + VWAP + Volume + Sector + S/R level + MA)
  |-- 0-2 points --> PASS on trade
  |-- 3 points --> Take with standard position (1% risk)
  |-- 4+ points --> Take with increased position (up to 2% risk)
  |
  v
What does Level 2 show?
  |-- Supports the trade direction --> Confirms entry
  |-- Neutral --> Proceed with standard position
  |-- Contradicts the trade direction --> PASS on trade
  |
  v
Calculate position size based on (Account risk % / per-share risk)
  |
  v
Define: Entry, Stop Loss, Target 1, Target 2, Trail Method
  |
  v
EXECUTE and manage according to plan

Complete Checklist: Daily Trading Workflow

Pre-Market (6:00 - 9:30 AM)

• Review overnight futures and international markets
• Check economic calendar for scheduled events
• Run gap scanners and filter for top 3-5 candidates
• Draw support/resistance, pre-market high/low on each candidate
• Define specific setups and trade plans for each stock
• Review previous day's journal for lessons learned
• Confirm mental readiness (emotional state 7+ out of 10)

Market Open (9:30 - 10:30 AM)

• Watch watchlist stocks for first 2-5 minutes without trading
• Identify which stocks are respecting pre-market levels
• Wait for patterns to form (do not chase the opening move)
• Execute trade only when setup matches your plan
• Manage position according to scaling rules

Mid-Day (10:30 AM - 2:00 PM)

• Reduce activity (lunch hour is typically low quality)
• Re-scan for any new setups forming on higher timeframes
• Review morning trades in journal
• Only trade if an A+ setup presents itself

Power Hour (2:00 - 4:00 PM)

• Watch for end-of-day momentum setups
• Evaluate any positions for overnight hold potential
• Close all remaining day trades by 3:50 PM unless holding overnight
• Run final journal entry for the day

Post-Market (After 4:00 PM)

• Complete trading journal with all trades
• Calculate daily P&L and compare to targets
• Review each trade: Did I follow the plan?
• Identify one lesson learned for tomorrow
• Prepare a preliminary watchlist for the next day

Key Quotes & Annotations

"The best traders I know don't have more strategies than others. They have more discipline." - Aziz emphasizes that the edge is in execution, not in the number of tools you possess.

"Your job is not to be right. Your job is to manage risk and let probabilities play out over a large sample of trades." - This quote captures the statistical mindset required for long-term profitability.

"When you find yourself hoping a trade will work, you've already lost. Hope is not a strategy. If the setup is valid, the evidence will be visible on the chart." - On the danger of emotional attachment to positions.

"The stop loss is the single most important order you place. It is not optional, it is not mental, and it is not flexible. It is a hard order that exists before you enter the trade." - On non-negotiable risk management.

"Two red days in a row means something is wrong - either with the market, your strategy, or your mental state. Three in a row means you must take a day off. This is a rule, not a suggestion." - On knowing when to step away.

Critical Analysis

Strengths

1. Practical specificity: Unlike many trading books that speak in vague generalities, Aziz provides exact criteria, numbers, and thresholds. You know precisely when to enter, where to place stops, and how to size positions.

2. Integration framework: The book does not present isolated strategies. Every technique is connected to a larger decision-making framework. The confluence scoring system is particularly valuable.

3. Honest about failure rates: Aziz does not hide the fact that even A+ setups fail 25-35% of the time. He is transparent about his own losing trades and uses them as teaching tools.

4. Community-tested: The strategies have been refined through the Bear Bull Traders community, providing a larger sample size than one individual trader's experience.

Weaknesses

1. Small-cap bias: Many examples focus on stocks with relatively small market capitalizations, which can have erratic price behavior. Traders working with larger accounts may find liquidity constraints.

2. Limited discussion of short selling mechanics: While short setups are covered, the mechanical challenges of short selling (locate fees, short squeeze risk, uptick rules) receive minimal attention.

3. Over-reliance on VWAP: While VWAP is undeniably important, the book sometimes presents it as almost infallible. There are market regimes where VWAP-based strategies underperform.

4. Survivorship bias concerns: The real trade examples are selected to illustrate concepts, and while Aziz includes losing trades, the selection may not be fully representative.

Modern Relevance (Post-2020)

Since publication, several market dynamics have shifted:

• Algorithmic trading accounts for an even larger share of volume
• Commission-free trading has increased retail participation and volatility in small caps
• The rise of options-driven price action (gamma squeezes) affects intraday patterns
• Pre-market trading has become more active and liquid

Despite these changes, the core principles remain sound. VWAP as an institutional benchmark has only become more relevant. Risk management discipline is timeless.

Building a Trading Business Plan

Aziz dedicates the final chapter to treating trading as a business, not a hobby:

Reading Recommendations

• Before this book: How to Day Trade for a Living by Andrew Aziz (the prerequisite)
• For deeper technical analysis: Technical Analysis of the Financial Markets by John Murphy
• For trading psychology: Trading in the Zone by Mark Douglas
• For order flow mastery: Trading and Exchanges by Larry Harris
• For risk management theory: The Mathematics of Money Management by Ralph Vince
• For market microstructure: Flash Boys by Michael Lewis

Final Verdict

Rating: 4.2 / 5 stars

Best for: Traders who have completed at least 6 months of screen time and understand basic chart patterns, candlestick formations, and fundamental risk concepts. This is not a first book; it is a second or third book.

Not for: Complete beginners, long-term investors, or anyone looking for a "set it and forget it" approach.

One-line takeaway: The difference between a losing day trader and a profitable one is not more strategies but better trade selection, tighter risk management, and relentless self-discipline.