Orders, Level 2, Price Action COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 1

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1 Orders, Level 2, Price Action ANDREW AZIZ SESSION 3 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 1

2 Disclaimer BearBullTraders.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) 2

3 Class Overview 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 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 3

4 Understanding Montage and Level 2 Level 1 Level 2 Market depth (Liquidity) Hotkeys Order entry COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 4

5 Market Orders Buy me at any price! Now! Sell me at any price! Now! You remove liquidity Limit Orders: add liquidity Buy me at this price (or better) only! Not higher! Sell me at this price (or better) only! Not lower! You add liquidity COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 5

6 Market Orders are like blank check, you may get some nasty surprises These sudden downward spikes are probably market orders getting filled almost 100% lower than market price. Previous day close 18 April 2017 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 6

7 Marketable Limit Orders Buy me now, but up to this price! Not higher! Sell me now, but down to this price! Not lower! COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 7

8 Level 2 Depth: Bid-Ask Spread: Market Makers Territories Bid-Ask Spread: 1 cent 0.02% slippage = 1cent/$34.76 Bid-Ask Spread: 11 cents %1.7 slippage = 11 cents/$6.42 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 8

9 Stop loss order will be placed in the market book. That is why I do not use hard stops, it can get manipulated! COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 9

10 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 10

11 Level 2 Signals Big Bids (big buyer): Beairsh! Big Asks (big seller): Bullish! COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 11

Level 2 Signals Volume & Traders Psychology

12 Level 2 Signals Volume & Traders Psychology Aggressive Buying: Buyers pay more on ask (why?) Aggressive Selling: Sellers accept less on bid (why?) Color in time and sales shows traders psychology COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 12

13 Level 2 Signals Aggressive Buying? Not really Buyers are not willing to pay more They are low balling! COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 13

14 Level 2 Signals: Big bid/ask are only close to current price are real. Other big numbers are kind of fake: NITF orders (no intention to fill orders)! NITF order COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 14

15 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 15

16 See it LIVE Yourself: COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 16

NOTE: Level 2 signals are only one piece of

17 NOTE: Level 2 signals are only one piece of information You have to look at other indicators too before making any trade. In this example, both the Scanner, 5-min and daily chart are also indicating a short position. COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 17

18 Key Points 1. To get fast fills in day trading, you can use marketable limit orders. 2. Market orders are usually filled good, but sometimes you can get nasty fills! 3. Pay attention of bid-ask spread as it cost you in day trading. 4. Big bids are usually bearish. Big asks are bullish. 5. Level 2 signals can be used for trading, but they are only part of the big picture. COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 18

19 Price Action Candlesticks for Social Psychology COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 19

20 Bullish Candlesticks COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 20

21 Bearish Candlesticks A series of bearish candles shows bears (sellers) are in control of the price. COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 21

Price Action Analysis for Trade Management How to Use Price Action short Initial stop loss stop loss after first cover Note: I bring my stop loss to break even (b/e) after first profit taking.

22 Price Action Analysis for Trade Management How to Use Price Action short Initial stop loss stop loss after first cover Note: I bring my stop loss to break even (b/e) after first profit taking. I did not wait, because of bullish pattern right after bearish pattern. Cover half in 2 steps Covered all Also, failed to make a new 5-min low COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 22

23 Initial stop loss stop loss after first cover short VWAP All out Cover half 50 SMA final profit target COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 23

24 Indecision candlesticks COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 24

25 Indecision for reversals COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 25

26 5-min Pattern Higher highs, higher lows: Bullish pattern Lower highs, lower lows: Bearish pattern COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 26

27 Where did the uptrend start? Most people think at point D (wrong) Uptrend started after point B (higher highs, higher lows) COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 27

28 Trade Management How to Use Price Action in Real Trade Stopped out Bearish bar bullish bar Add more Short VWAP Low of the day COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 28

29 Trade Management How to Use Price Action in Real Trade COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 29

30 Trade Management How to Use Price Action in Real Trade COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 30

31 Engulfing Patterns: Reversals Signs COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 31

32 Trade Management How to Use Price Action in Real Trade COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 32

33 Trade Management How to Use Price Action in Real Trade COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 33

34 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 34

35 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 35

36 COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 36

candlesticks 5-min patterns can be seen: higher highs Higher lows lower

37 High Frequency Trading Small movements, high volume Choppy price action Big candlesticks Big wicks, No 5-min trend can be seen Good price action Small candlesticks 5-min patterns can be seen: higher highs Higher lows lower lows lower highs COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 37

38 Key Points 1. Candlesticks with big white bodies are bullish, it is not a good idea to short after them. 2. Candlesticks with big red bodies are bearish, it is not a good idea to go long after them. 3. Take partial profits, and bring your stop loss to break-even min higher highs higher lows are bullish. 5-min lower lows lower highs are bearish. 5. Engulfing patterns are powerful reversal signs. 6. Understanding price action is key in your trade management. COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 38

39 THANK YOU. COPYRIGHTED MATERIAL: ANDREW AZIZ (C) 39

Orders, Level 2, Price Action

Orders, Level 2, Price Action ANDREW AZIZ SESSION 3 Disclaimer BearBullTraders.com employees, contractors, shareholders and affiliates, are NOT an investment advisory service, a registered investment advisor