Advanced Techniques in Day Trading Vocabulary

Vocabulary-style flashcards covering the key technical terms, strategies, and risk management rules found in Andrew Aziz\'s advanced day trading guide.

Discretionary Trading

A style where the trader evaluates potential trades based on technical analysis and experience, making calls to take or pass on trades rather than following a firm algorithm.

Mechanical Trading

Trading strategies executed by a computer program based on technical inputs, indicators, and backtested historical data to produce positive expectancy.

Pattern Day Trade (PDT) Rule

A U.S. regulation requiring traders who execute four or more day trades within five business days to maintain a minimum account equity of 25,000.

Direct-Access Broker

Brokers focusing on speed and order execution that allow traders to interact directly with stock exchanges via electronic communication networks (ECNs).

Float

The total number of shares of a particular company available for public trading.

Market Capitalization

The total market value of a company\'s shares, calculated as \text{Float} \times \text{Current Market Price per Share}.

Stocks in Play

Stocks that have high relative volume and fundamental catalysts, such as earnings reports or news, causing them to move independently of the overall market.

Average True Range (ATR)

A technical indicator representing the average range a stock price moves during a standard trading session.

Volume Weighted Average Price (VWAP)

The most important day trading indicator; it is the average price a stock has traded at throughout the day, based on both volume and price: \frac{\sum (\text{Price} \times \text{Volume})}{\text{Total Volume}}

Support

A price level where buying pressure or short covering is strong enough to prevent the price from declining further.

Resistance

A price level where selling pressure or profit-taking is strong enough to prevent the price from rising higher.

Marketable Limit Order

An order to buy or sell at a specific limit price that is immediately executable at the current market price (e.g., buying at \text{Ask} + 0.05\,\text{USD}).

Short Selling Restriction (SSR)

A rule triggered when a stock drops 10\% or more from the previous close, restricting short selling to the \'uptick\' (only on the ask side).

Stop Range (Bracket) Order

An order type that sets both a stop loss and a profit target simultaneously; when one is triggered, the other is automatically cancelled (OCO).

Bull Flag

A bullish pattern consisting of a sharp price increase (the pole) followed by a period of consolidation (the flag) before a further breakout.

Opening Range Breakout (ORB)

A strategy involving a trade taken when a stock breaks the high or low of its initial trading period (typically 5, 15, or 30 minutes after the open).

Fallen Angel

A low-float strategy where a stock gaps up, sells off quickly to a support level, and is bought as it breaks back above VWAP with high volume.

Averaging Down

The dangerous practice of adding to a losing position to lower the average cost; a major cause of account failure for novice traders.

2% Rule

A risk management rule stating a trader should never risk more than 2\% of their total account equity on any single trade.

6% Rule

A risk management guideline that mandates a trader stop trading for the remainder of the month if their total account losses reach 6\%.