PREFACE

“The market can remain irrational longer than you can remain solvent.”

John Maynard Keynes

Anything can happen in the market.

Want some proof? How about these used-to-be prominent names: Enron, Lehmann Brothers, and most
recently, GTAT Technologies?

 GTAT fell to almost zero after filing for Chapter 11 couple months ago

According to the chart above, if you had invested $10,000 (for approximately 1,000 shares), your money
would now be worth $440.
Ouch.
That is the “dark power” of investing. It has the capability to destroy somebody’s personal finance.
However, when done correctly, investing has the “power” to help everyone build his or her wealth.
The beautiful part: The investment market never cares about your background, origin, race, skin color,
physical ability, which college you attended, your religion, or any of the BS that could get us into trouble
with any American company’s Human Resources department.
Many people dream about financial freedom. Investing is necessary to reach that elusive freedom.
However, too many people want the easy way and, therefore, treat investing half-heartedly.
Regardless of the investment vehicle (stocks, bonds, real estates, futures, forex, mutual funds, and
businesses), investing will require a lot of effort to be profitable consistently.
Sure, everyone’s stocks went up during the Dot Com Bubble in 2000. But, during the year that followed,
most people crashed along with their tech company stocks.
If investing was that simple, the world would be full of billionaires today.
But it is not that easy. Although, it does not have to be stressful or complicated. Investing, just like any
other business or profession, requires proper and practical strategies.
Let’s read the heartwarming story below.
How One Student Turned $30,000 to $240,000 With ONE Stock

Consider the life-changing story of Patrick Hop, a student of Berkley University at California, who
invested $30,000 in Tesla stock (TSLA) and purchased them at $22 each.
Of course, he received some repulsions when he initiated the investment. All those people shut their
mouths when TSLA skyrocketed from $32 to $160 within a few months.
And that $160 price was at the time when the news came out. TSLA actually hit its All-Time High at
$287.67 few months afterwards.
 The life-changing money made in TSLA stock

That was about an 800% profit. Considering the guy invested his life saving of $30,000, he must have
made about $240,000 less than a year after this investment (assuming he did not chicken out or sell the
stock when it hovered around $200).
That is quite a life-changing amount of money, wouldn’t you agree?
What is the downside of this Do-It-Yourself Investing style? First is the time required to find and
research the right stocks. Second, because the money would not be managed by professional money
managers, DIY investors like you and I incur a higher chance of getting wiped out by the market.
Unless we are well-educated enough to manage an investment portfolio, diversification actually can make
things worse when investing.
“Wide diversification is only required when investors do not understand what they are doing.”
Warren Buffett

Why is that? Without clear methods and a strong conviction, small investors like us will only become the
breakfast for the big players. And worse, the more we diversify the more we put our money at risk. This,
in turn, also means more food for the sharks of Wall Street.
But we can time our action. How?
We do it by asking ONE right question and then taking the right actions afterwards.
However, before we go to the details, we need to know WHAT that one question is and the logic behind
that question.


PREFACE
GET THIS BOOK FOR $3.49 $0
THE 2-HOUR TRADING
1
A Person can be Smart, but People are Generally Stupid
2
Some Trading Rules Are Meant to Be Broken
3
Repeat This Again and Again Investing is NOT Trading
4
Strive for Opportunities with Disproportionate Reward to Risk
5
Buy and Hold Strategy can be Hell Sugarcoated as Hope
6
Know When to Exit When You Are BOTH Winning and Losing
7
Always Start with WHY. Why are You Trading This?
CONCLUSION
PREVIEW
FREE 3-DAY TRADING-INVESTING COURSE
I APPPRECIATE YOU
ABOUT
 GET THIS BOOK FOR $3.49 $0
…Plus $9.99 $0 Risk Profile Test, $49 $0, 3-Day Trading Course, and $99 $0 Trading WatchList

Find Out HOW

You must read our DISCLAIMER before we start.

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GET THE FREE TEST HERE

 THE 2-HOUR TRADING
It is a simple concept.
A mere idea that, after years of researching and back testing, turns into a strategy and finally a system.
When I first got involved in the market, I noticed a phenomenon.
There are at least 10 stocks (I started trading strictly US stocks) that moved at least 2% or more during
the first 2 hours after the market opened.
I was, and still am, an active day trader. Throughout the years, I must have witnesses this phenomenon
thousands of time.
This concept is based on the fact that in the market, the big price movements are typically made during the
first couple hours after the market opens.
Trading can be hazardous to our mental. It is unrealistically brutal to sit down for 7.5 hours (that's 27,000
SECONDS - mind you) staring at the price ticking at your trading screen from opening to closing.
This trading system, however, aims to make MORE MONEY with LESS TRADES.
Which in turns gives us MORE FREE TIME and LESS STRESS.
With the 2-Hour Trading System, we can avoid this problem while still making enough profits.
I suggest you check the introduction book before you move forward reading this book. It is FREE and it
will help give you clearer understanding on how the system works.
You can download it FREE from Amazon Kindle HERE, or get the pdf file HERE.
Onwards.

1
A Person can be Smart, but People are Generally Stupid

“The stock market is never obvious. It is designed to fool most of the people, most of the time.”

Jesse Livermore

The fact that you are reading this book shows that you are an aspiring speculator, an experienced
speculator, or someone who is looking to get back into the game of speculation, hopefully not because you
were previously being slapped hard by the Mother Market.
In any case, unless yesterday was your first day in the market, you know how it feels to lose money.
You know that feeling when the stock (or any security for that matter) you were holding teased you by
going up a little before going down much more at a faster speed than you could have imagined.
Then you were faced with a decision. Let go and admit that you were wrong, or continue to hold on and
hope the price will bounce soon.
Well, in this book, we will learn about the ONE question that matters along with ONE cardinal sin of
trading that is actually committed by millions of investors and traders every day.

That ONE Question that Matters in Speculation

“GOOD traders think about markets before they place their trades. GREAT traders do that – and they think
about their thinking. This makes their trading more intentional, more controlled, and ultimately, more rule-
governed.”

Brett Steenbarger, Trading Psychologist

“Which stock is hot right now?”

“What did Jim Cramer say yesterday about Facebook stock?”
“How much Apple stock with go up after iPhone 6 was released?”
“When will oil price bounce back?”
I promise you that, at one point of your life, you will hear the questions above, or the variations of them,
either asked to you, asked around you, or asked by you.
This will occur even if you are not in on the lookout of for a good stock to invest in, or even if you do not
have any interest in this crazy area called speculation.
Speculation is part of our society’s habit and, dare I say, culture.
It went goes all the way back to 1867, when the stock ticker appeared for the first time. It was not until
1920, the decade when Jesse Livermore (some would say he is the Father of Momentum Trading) made
millions, that the stock speculation industry took off.
In the present day, stock speculation, or “investment”, has grown on the people everywhere around the
globe.
TV shows, magazines, and talk shows are made exclusively for discussing opinions and analysis in this
area. Check out The Mad Money, The Wall Street Warriors, Squawk Box, or Fast Money on Bloomberg
TV, CNBC, and many more.
It is amazing to think about this actually. It is impressive how the world has made the speculation industry
full of personalities and drama, while the correct way to speculate, whether in equities, futures, or
commodities, is to minimize the emotions involved in the process.
Emotions kill logic. Emotions make the opinions of the so-called experts and analysts in those TV shows
sound like Moses’ words. More importantly, emotions make average speculators into followers. As the
result of their ignorance, average speculators will go “ALL-IN” with all their hard-earned money
following the recommendation or advice of some expert or analyst.
Moreover, what seems unethical to me is the fact that those analysts actually put their money in a
balanced-risk or fixed income mutual fund instead of putting their money where their mouths were.
The single phrase that always ticks me every time I hear it: “But this guy, or that guy, or the analysts in
CNBC said…”
It is ignorance at its best.
“I believe that the public wants to be led, to be instructed, to be told what to do. They want reassurance.
They will always move en masse, a mob, a herd, a group, because people want the safety of human
company. They are afraid to stand alone because they want to be safely included within the herd, not to be
the lone calf standing on the desolate, dangerous, wolf-patrolled prairie of contrary opinion.”

Jesse Livermore

Nothing worth doing is easy, yet many speculators think they know the direction of Apple stock or when
the oil price will bounce just by reading and listening to the analysts and so-called experts.
Speculators are required to do the homework to find sectors and individual instruments that fit their
personalities and match their risk tolerance the most.
Warren Buffet made billions by buying undervalued stocks. He purchased the stocks when they were
cheap and reaped the benefits when the real values were finally realized.
On the other side of the coin, Dan Zanger turned $10,000 into $1 million by buying momentum stocks. He
only bought stocks when they were making new highs by breaking out of previous consolidation (more
about that later). He rode the trend while it lasted and, unlike Buffet, Zanger did not hold his investment
for a long period of time.
The four questions you read in the beginning of this chapter are NOT the correct questions to ask. They
are the questions that were asked by lazy speculators in the past who refused to do the adequate research
and, instead, put their money blindly in the mercy of the market.
To me it is no different than going to Las Vegas and throwing the money on the roulette table.
The question you need to ask actually does not involve Jim Crammer, Warren Buffet, George Soros, or
any legendary traders and investors out there.
Leave alone all those CNBC, Bloomberg, or other media analysts whose jobs, sometimes, were to create
stories and dramas overhyping the market (it feels like it, truly).
The one question you ask should involve YOURSELF. Why? Because people are stupid generally. There
is a certain form of social pressure, as well as a willingness to be led (or told what to do), when it comes
to the world of investing and trading.
It seems that people lose trust on their own capabilities to make their own judgement when it comes to
good stocks to own.
Too many people invest or trade some stocks simply because they have listened to the analysts, to the
investing newsletter they subscribe to, to the neighbors they talk with over the weekend, and more.
Have you ever asked yourself this question?

Am I an Investor, or Am I a Trader?
And that, ladies and gentlemen, is the single most important question in stock speculation.
“Investing is the intersection of economics and psychology.”

Seth Klarman

The question puts the responsibility back on us, instead of on others’ opinion.
In the world of speculation, it is the right thing to do. Learn how to trade or invest, start small, lose some
money (and you WILL lose money), go back to the charts and learn from your mistakes, try again and lose
less money, go back to the studying room and see what you do wrong, trade again and breakeven, re-study
your trades, make small money, and eventually, make enough/big money.
Notice there is no “watch CNBC or Bloomberg” there!

 2
Some Trading Rules Are Meant to Be Broken

“The golden rule is that there are no golden rules.”

George Bernard Shaw, Co-Founder of London School of Economics

This chapter might be a bit controversial. Hence the disclaimer at the end of the chapter.
It is controversial but worth a chapter in this book. Why? Because most people, regardless of their level
of trading or investing experiences, get this wrong
I am sure that you have heard people ask: “Is the market good today?” Or perhaps you have heard them
saying: “You must trade in accordance to the market direction.”
What if I tell you that the question and advice are not entirely accurate?
Let’s take a look at the US market chart below.
 The US Market Benchmark (SPY)

We can see how the market is in uptrend during the month of May 2015. This is marked by the ascending
black trend line.
But now take a look at one particular stock below.
 Alcoa Corporation (AA)

During the same month (May 2015), the stock Alcoa (AA) has actually been in a downtrend, which is marked by the descending black trend
line.

It is the same period and the same US market. But we see a different direction.

Why is that?

Trading Rule to Break # 1

The answer brings us to the first NEW trading rule:
Stock First, Market Second
Let’s dig a little deeper and take a look at the intraday chart.
During this particular day in the stock chart below, the US market was having a downtrend day.

The US Market Benchmark (SPY)– Intraday 15 minute Chart

Yes, majority of the stocks traded in the US market were down during the same day—but not all.
 Sears Holding Company (SHLD)– Intraday 15 minute Chart

Sears Holding (SHLD) was having an uptrend day (black ascending trend line) on the same day the whole
US market was having a downtrend day.

***********
Therefore, it is worth remembering that in every weak market (or weak day in the market) there
will be strong stocks. Also, in every strong market (or strong day in the market) there will be weak
stocks.

***********
Underperformers and overperformers are everywhere, including the market.
Stock First, Market Second. Not the other way around.
Ready for more thought-changing rules?
Here is another common investing or trading advice that I, and maybe many of you, often heard:
“I trade based on price supports and resistances” or “Price has memory, hence a reversal is bound to
happen at major supports and resistances.”
While trading around supports and resistances have been one of my major strategies, know that there will
be times (and they are good times!) when supports and resistances do not matter.
In life, momentum is everything. So is momentum in the market.
When the market (or a stock) is having a strong momentum, supports and resistances are bound to be
broken.

Trading Rule to Break # 2

This brings us to the second NEW trading rule:
Price Momentum First, Supports or Resistances Second
Kind of similar with that of life, isn’t it? Previous records and achievements are bound to be broken as
long as there are momentums to do the right things.
Let’s take a look at the AVGO stock chart below:
 AVGO Trend Line

We can tell that AVGO has had resistances at 130 and 135. Nevertheless, when the uptrend momentum
started in the beginning of May (see the ascending yellow trend line), the strong momentum pushed the
130 resistance before it carried on and broke the major 135 resistance.
As traders, we must be prepared to switch our strategy from day trading to swing trading when AVGO
breaks 130 and holds up.
Why?
Because we know from the book 10 Enigmatic Trading Price Action: How To Exploit Price Action
Behaviors When Day Trading And Swing Trading that momentum begets momentum.
The price action anomaly also extends to the other side. Take a look at the AAL chart below:

American Airlines (AAL) Trend Line

In the American Airlines chart above, the long-term support of 46 was broken when a strong downtrend
momentum started slightly below 48.
Yeap, momentum always begets momentum. Momentum is great because inside the strong, steady, long
momentum is where the most is made in trading.


Trading Rule to Break # 3

The third advice to break is a sensitive one.
This is mostly because I am bashing many financial authorities out there by deeming them “irrelevant”.
Okay, that would be a very strong statement. However, the way CNBC or Marketwatch.com “dramatize”
the financial news sometimes gets on my nerves.
 Crappy News Headline

Look at the headline.

“Stocks could rally next week!”
Those kind of headlines really annoy me because the news has become commercial instead of
informational.
We should not make predictions. We should make plans, yes, but no predictions.
Plus, haven’t we all learned that most news of the out there is not really news? By the time the public
heard about the news, the major movements are usually over.
Even worse, the news and the price action are not always synchronized. In other words, there will be
times when price drops with GREAT news, and price goes up with BAD news.
This brings us to the third NEW trading rule:
Price Action First, News Always Second
Consider the headline from one of the most trusted financial websites out there, Investors.com.
“Autohome ……………(fill in the blank) Q1 Beat; Revenue Outlook Tops”
Just by looking at the headline (please don’t cheat by clicking the link to the news), what do you think the
blank would consist of?
The words “jumps”, “rises”, and “gaps up” typically come into our mind because, after all, the company
has beaten its 1st quarter forecast, not to mention the fact that the revenue outlook was bright.
These are the wrong words, unfortunately.
The chart looks like this:
 ATHM Earnings Announcement

That big, bad, audacious red candle was the candle of the day when the “good” earnings were announced.
Enough for listening to the news when trading.
By the way, the phrase to fill in the blank above is “….tanks despite….”.
Let’s go with another example. Read this financial news excerpt below:
For fiscal 2015, the company now expect earnings in a range of between $7 per share to $7.60 per
share. Analysts expect the company to earn $5.67 per share for the full year.
Still, the company released better-than-expected first-quarter earnings late Tuesday.
For the first quarter, Fossil earned 75 cents per share, compared to $1.22 per share a year ago, but
still topping the 64 cents analysts were expecting, according to Thomson Reuters.
All good news! The spring seemed to begin for this Fossil Company.
Except the stock price. Take a look at the chart below:

FOSL Earnings Announcement

The stock price plummeted during the day of the earnings.

News is wonderful because news serve as catalyst for the big, upcoming movements. The bad things
happen when traders (or investors) become stubborn and treat the news like Moses’ words and, worse,
interpret the news according to their perception despite the price action saying otherwise.
Be careful on this one. Remember: Price action always comes first.
Disclaimer:
The three trading advices mentioned here are GOOD advices. They work most of the times. However,
the times when they do not work cost many traders their fortunes.
Treat this section as a precautionary.



3
Repeat This Again and Again Investing is NOT Trading

“The individual investor should act consistently as an investor and not as a speculator.

Ben Graham

We will start with this statement: Trading is NOT the same with investing.
This is a very important concept because this one common mistake, unfortunately, is proven fatal for many
beginners and even seasoned and experienced speculators.
In general and practice, trading and investing are two different things.

The Art of Investing

“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”

John Bogle

Investing should always have a long-term perspective. The goal is to find the best companies out there
who are still going to get better or even to be great in the future either because of a competitive advantage
in product (Apple), service (Nordstrom), or logistics (Wal-Mart) or because of other X-factors like being
ahead of the game (Netflix, Amazon).
Investing involves activities such as researching the companies of interest. One should look at information
such as the total sales, latest financial report, previous eight quarters of earning reports, amount of assets,
amount of debts, amount of cash flows, and more.
Some of this information can be found in the internet (Finviz.com, Google Finance, Bloomberg, or Yahoo!
Finance will be a good place to start). But is it enough?
Unfortunately, the answer is NO. Peter Lynch is famous for his legendary return of 29% between 1977
and1990 as the fund manager of Fidelity’s Magellan Fund. He often had to make visits to the company
stores or headquarters to talk to the employees and to build business relationships with the big guns of the
companies he visited.
He did that to confirm his research-based convictions about the companies before he could make a
decision of whether to invest in them.
A company’s financial information definitely means something but not everything.
Unfortunately, many people have become obsessed with this information and they forget, to their
disadvantages, that they do not have the same access to all of the information.
The big institutions and fund managers, like Fidelity and Peter Lynch, will always beat the small, retail
investors like us in this regard.


So, How to Invest?

There are two ways to invest. Both have their own advantages and disadvantages.
The first is to outsource your investment to money managers or institutions. We can do this by buying
mutual funds in accordance to our risk tolerance. There are a few types of mutual funds (money market,
fixed income, balanced risk, and equity) but all of them share one unpleasant, ridiculously high similarity
—management fees.
According to Tony Robbins in his newest masterpiece MONEY MASTER THE GAME: 7 SIMPLE STEPS
TO FINANCIAL FREEDOM, it is unwise to invest in individual mutual funds because of the steep
management fees and the many other hidden fees.
Not to mention, the gain of investing in individual mutual funds, in the long run, will not beat the gain of
investing in the market index as a whole.
If you want to invest, the book suggests low-cost mutual funds that track the US index (most notably
Standard & Poor 500—or SPY). Leave your money there for years. The money will be managed by a
professional money manager. The fund recommended: Vanguard Total Stock Market Index Fund
Admiral Shares (VTSAX).
Of course, we probably have heard the opposite point of view from what Tony said. I am not going to tell
you what is right or wrong. Please do your own research on this.
What I know for sure:
1) At certain times, there are mutual funds that actually yield 15%-20% and thus beat the
gain derived from investing in the whole market. Outperformers exist.
2) The risk of investing in the whole market will be smaller compared to that of trading
individual mutual funds or stocks but, frequently, so is the return.
High risk high return is an undisputable law of life.
The second way is the DIY way (Do-It-Yourself).
In order to do so, we have to find stocks with good fundamentals and good products or services on our
own. Wouldn’t you agree that our brain would first go to prominent companies such as Apple, Google,
Facebook, Amazon, Caterpillar, McDonald’s, Disney, Microsoft, Exxon Mobile, UPS, IBM, or Federal
Express?
Unfortunately, investing is not that easy. There is a time to buy and a time to NOT buy regardless of how
prominent those companies are.
We will talk about this later, but for now we should know the upside of the DIY approach. There are no
crazy, high, or hidden management fees. Meanwhile, we still get the unlimited potential of our investment.

The Tale of Two Smartphones

Looking for the right stock to invest in is never easy. We live in the era of superfluous amounts of
information to the point that information overload is almost a social norm.
This results in confusion for most small investors like us.
When people are confused yet feel compelled to take action, they most likely to do one of these two
things:
1) Take a blind guess on what to do. They take Hail Mary actions and hope things will work out.
2) Listen to other people. Following gives safer feeling and is much easier than leading.
Have you ever felt this way when you were about to buy or sell a certain stock?
Everyone has a different opinion on the direction stocks will take. (Hence the market exists. It is the place
where supplies meet demands.) Thus, we can only make the decisions to invest on certain stocks after we
have done our research.
I can’t stress this enough. Investing or trading is not easy and certainly not a way to make as much money
in as little time as possible. Investing and trading take time to learn and possibly take the whole lifetime
to master. Even the people who have proved their ability still think that they have something more to
learn.
Let’s take an example of when picking the right stock results in a good investment.
 The famous Apple stock. Stock chart is based on POST 7:1 Split (2014).

This is investing. A person bought AAPL, because he had done all the research, back in 2005 when AAPL
was less than $10 per share (about $70 before 2014 Split). He is now about eight times wealthier— in
less than 10 years! That person could only invest in 1000 shares ($10,000) and the value in 2012 is now
about $80,000. That’s not bad at all.
Even another person who bought the stock a little bit later, after the price has moved up, still made pretty
good ROI from his investment. The second investor who bought 1,000 AAPL for $30 ($30,000) had
above $50,000 in profit (before tax) at the same time the guy above had $80,000 in profit.
Now let’s see the other side of the coin (never forget that there is always the other side of the coin).
Always remind yourself that no matter how good we are, there is always a chance we could lose all of
our money.
 BlackBerry Chart (BBRY – formerly Research in Motion /RIMM)

Who does not know BlackBerry?

Back in the beginning of this millennium, BlackBerry was the most important communication device a
corporation could have.
It was a symbol of status and an emblem of success.
Then the decline happened. The game-changing products and business moves made by Apple, Samsung,
and even Google were brushed off by BlackBerry, just like Blockbuster arrogantly gave Netflix a cold
shoulder at first.
It was just like when traditional brick-and-mortar giant stores such as Barnes & Noble, Borders, and Best
Buy brushed aside the emergence of a “small” online bookstore with the name of Amazon.com.
The rest, they said, was history.
The result and consequence of those companies’ refusal to adapt were sadly similar.
Blockbuster and Borders have since shut down. Barnes & Noble and Best Buy are always struggling to
maintain consistent profitability.
BlackBerry’s failure to adapt to the changes within the cell phone industry has caused its stock price to
lose 90% of its value. The stock was at and All-Time-High of $148 in June 2008 and, tragically, at an
All-Time-Low of $5.44 in December 2013. It had bounced to the area of $10 per share as of November
2014, which is still far cry from its All-Time-High.
How did it happen? No one can know for 100% certainty. Try talking to different analysts and you will
get different answers.
All we know is that many people thought the stock was cheap when it was around $50 and bought it
thinking, “Hey, I have used BlackBerry all of my life and I like it. The stock will rebound.”
Then, they spent their hard-earned $10K or $25K and purchased the stock with the hope that the price
would rebound.
These people are still waiting for that to happen. Meanwhile, they have witnessed the money the invested
in the stock sink down to a worth of only $2K or $5K.
It’s not a recipe for a good night’s sleep, is it?
These people have no plan regarding when to get out of their investment or cut their losses. Or maybe the
thought of selling frightens them. After all, when they sell and realize that huge dollar loss, they will lose
the hope that the price will rebound. For now, at least, they can cling on to hope.
The case with BBRY is an example of how Do-It-Yourself investing could go wrong. Without proper
knowledge, research, technique, and diversification, DIY investing can be disastrous.
This is where trading comes into place. Trading is the “ninja technique” of investing that most people
actually miss.

 The Art of Trading
“Amateurs want to be right. Professionals want to make money.”

Anon

”Trading is gambling.”
“No trader makes money in the long run.”
“Trading is very risky.”
You will hear these saying, or perhaps you have already heard them before.
Let me say that trading is just like money. It is not good or bad, dangerous or safe.
Trading is just…“is”.
Just like money, if we do not know how to use it well, it will exacerbate our problems instead of solving
them.
Unlike investing, trading does not care much about long-term perspective. Typical traders have three main
concerns:

***********
1) Is the institution’s money in the stock or not?
2) What is the good (not perfect) time to enter and exit the trade?
3) How much fees and liquidity spread need to be paid?

***********
In trading, especially short-term trading (day and momentum trading), we want "instant gratification." We
do not want to wait to see a result after five years. We prefer immediate returns.
An AAPL investor would enter in 2010 and sell in 2012. An AAPL momentum trader does not have that
kind of patience. Trend and momentum were everything for this trading style. Thus, when AAPL broke
the predetermined trend line, it was time to sell (as illustrated by the first blue arrow below).
 AAPL Stock Chart

Traders will not have a problem getting in and out in a matter of weeks or days.
Apple tested the $217 area in 2007 but then when back to $70 during the financial crisis in 2008.
Investors who believe in the long-term investment would leave their money in the stock. But traders who,
for example, bought it when AAPL broke out $140 in the beginning of 2007 and enjoyed the gain to near
$200 would sell the shares when it broke $175 to the downside (all prices were before 7:1 Split).
We will see more trading in this book later, both theoretical and practical.
Trading could have much higher risk and return, and is done in a shorter time. Nevertheless, trading is
also one technique investors need to know in order to avoid “shooting in blind.” Trading provides the one
thing investing desperately needs
And that one thing, ladies and gentleman, is a sense of timing.
Ironically, without a trading skill, an investor is at risk of turning into the one thing that people have
accused traders of being.
A gambler.



4
Strive for Opportunities with Disproportionate Reward to Risk

“Wall Street people learn nothing and forget everything.”

Benjamin Graham

Most people use the terms investing and trading too liberally.
They say, “I am going to invest in Apple stock,” while they plan to take profits as soon as the stock
experiences its first correction or pullback.
Or more commonly, people say, “I am going to trade Amazon stock,” while they do not have any plan to
take profits or cut loss, and therefore end up treating the trade like an investment.
These are not the correct ways to speculate in the market.
The main pros of investing are:
---Bigger unlimited profit potentials
---More free time as it is not necessary to look at your investment every time. You
can set your alert and ride the wave (if you are in the right wave).
---Smaller 15% tax (assuming the security is owned over one-year period)
---Dividends that come with some stocks
The main cons of investing are:
---The time needed for the investors to achieve the investment goal
---The lack of control. Investors are exposed to the risks incurred by the company
and, most of the time, it would be too late to take an action
Some of the benefits of trading are:
---Quicker profits
---Capability to control the risks better. Trading, when executed correctly, can
prevent big losses from occurring.
The quicker profits come with a tradeoff as:
---Traders will inevitably leave some profits on the table.
---Traders are also subject to the bigger capital gain tax.
---Traders are prone to heavy physical, psychological, and emotional pressures.

The Ugly Truth

It seems that many people think it is easy to make money in the market.
They dream they will “score big” in the market and change their financial situation.
Most of them, especially the ones who expect big results yet refuse to do the homework, will end up in
grave disappointment.
Investing or trading is a risky business. It is risky because there is a possibility of losing everything in the
process.
There is no exaggeration in the word “everything” above.
If you think that money is the only thing lost in investing or trading, think again.
There are stories of people in their retirement age losing their entire savings and pension plans, couples
getting divorced because of the financial strains caused by poor investments, and even traders committing
suicide because of the emotional stress that inexorably comes with the job.
This is not to psych ourselves but the open our eyes to the fact that trading and investing is NOT a get-
rich-quick scheme—far from it.
If done correctly, trading and investing can be a life changer because the market, ANY MARKET, is an
opportunity machine.
Unlike the houses in the real estate market, the stocks in the equity market are liquid.
When the crisis occurred in 2008, many people tried to cut their losses and wanted to move on. They
realized the severity of the situation and wanted to get out from the real estate market.
Unfortunately, their houses were illiquid. It was not easy to cash in their houses, especially in the brutal
market condition we had back then.
With the market deteriorated and more people realized the scale of the situation, the owners were forced
to bring down their offer prices and incur deeper losses.
Enough with the argument that states: “Real estate investment is always going to be profitable.”
The liquidity problem is something we will hardly find in the equity market (assuming the equities traded
are NOT penny stocks or dubious stocks from suspicious companies). Any time we want to sell your
stock investment, either to make some profits or to cut some losses, there will always be buyers for our
stocks.
Don’t get me wrong. Real estate investment is still one of the best and most remarkable forms of
investment. Just ask Mr. Donald Trump or my MBA teacher who once said: “Investing in real estate
located in a developing country is the most profitable form of investment.”
However, just like investing in equity, investing in real estate requires planning.
Most people were too lazy to read the news about the real estate market, to join the community of real
estate investors, or to purchase a subscription to real estate investment magazines. Most people rely on
“their friends’ opinions on certain locations” or their own “gut instinct”.
This is quite similar to the fact that many people look at a stock chart and decide that the charts are “too
complicated” to read and interpret.
Instead, they chose to listen to their brokers’ recommendations or their gut feelings.
There is no 100% guarantee in the world of investing and trading. A hot investment this year can turn out
to be a disastrous investment next year. Thus, doing the homework by researching the nature of the
investment, the timing of the investment, and the overall market environment is mandatory.
Otherwise, it is not investing or trading. It is just gambling.
“The secret to being successful from a trading perspective is to have an indefatigable and an undying and
unquenchable thirst for information and knowledge.”

Paul Tudor Jones

Risk Management
“Anticipate the difficult by managing the easy.”
Lao Tzu

Risk management is such a crucial, yet commonly unnoticed, necessity to fruitful and active trading or
investing.
Being human, traders and investors who have produced a considerable amount of revenue throughout their
lifetime can lose everything (plus more) in just a handful of improper trades or investments if they fail to
utilize prudent risk management principles.
Risk Reward Ratio is a popular theme in commercial lingo. Putting your hard-earned money into the stock
markets has a great amount of risk and, if done, the profit of the money you are going to obtain needs to
be greater then what you originally invested.
But here is the question most people forget to ask, “How much greater?”
Imagine if a friend, who has had a history of financial trouble, requested to borrow $1,000 and promised
to give you $1,150 in a month. Your return would be 15%. Yes, it would be much higher than any other
investment you could have gotten in a one month timeframe.
However, the risk outweighs the reward in this case. The fact that your buddy is in financial trouble might
cost you that $1,000. For a 15% return, it might not be a prudent move.
But what if the return were 50% instead of 15%?
Now the Risk Reward Ratio seems a bit better.
“The most important questions of life are indeed, for the most part, really only problems of probability.”

Pierre-Simon Laplace

5
Buy and Hold Strategy can be Hell Sugarcoated as Hope

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know
yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the
enemy nor yourself, you will succumb.”

-Sun Tzu, The Art of War

Trading is war.
When we are trading, without consciously realizing it, we are facing the smartest of the smartest people in
the world.
And I mean in the whole world, not only in the area where we trade our stocks, ETFs, options, or futures.
Thank God for the internet.
With the advancement of technology, people in Sydney, Australia can trade and follow the action of the
traders working their socks off at the famous Wall Street in New York City, USA.
Conjointly, to make matters get bloodier, these smart people are not all the Mother Market has for us.
When we are trading we also face computer algorithms, the velocity of trade execution exceeds that of the
average human. This algorithm, widely known as the pesky High Frequency Trading (HFT), has the
capability to create a lot of fake movements and, thus, put retail traders like all of us at an enormous
disadvantage.
Therefore, the quote for the great Chinese Philosopher Sun Tzu in the beginning of this chapter is not a
dramatization.
Without a proper and state-of-the-art strategy, as well as the best-in-class execution plan, we will get
eaten by the bigger market players and even the HFT, ending up as the fallen soldiers.
One of the most critical factors in trading or investing is timing.
Unfortunately, too many people purchase an investment without any regards to timing.
When the price falls, they pray.
Consider the real story below.

The Time when Apple Stock Almost Cancelled a Wedding Ceremony

It was September 2012.
Apple was hot in the financial world. The stock AAPL had been up for the past seven consecutive weeks.
There was only a mini three-week correction, however the correction was preceded by another seven-
week rally.
AAPL had been running tirelessly from about $500 in May 2012 to the high end of $600 in September
2012.
Meanwhile, a friend of mine was getting ready to tie the knot in the middle of 2013. He had planned to
have his wedding in the Caribbean where he and his fiancé had vacationed a couple of years prior.
Around the same time, my buddy also received a promotion that bumped up his disposable income to the
point that he had some extra money to invest. He immediately “knew” which stock he wanted to invest in.
Or did he?
He read the Wall St. Journal and Bloomberg while religiously following the financial news on CNBC. In
each turn, it seemed AAPL was making all the correct business moves. Heck, at one point the company
even had more cash flow than the country of Iceland.
No Steve Jobs? No problem. Tim Cook could handle it.
Besides, who could resist the new iPhone 5 that was due to be released on September 21, 2012?
So he bought the stock at about $675 and he also gave himself a little “early Christmas present”, a brand
new Zenith watch (priced slightly below $10,000).
Little did he know the hell he would have to go through for the subsequent 10 months.
AAPL indeed kept going until it hit the $700 area. My buddy could not be happier.
 Apple stock reached All-Time High

Then the movement came to a halt. Eventually it reversed sharply.

So when the price fell to $650, I asked my buddy, “What’s your plan, mate?”
His response?
”I am sure it will bounce. All the analysts still recommend to hold the stock.”
Sound familiar?
The price declined slightly below $600. At around $585 I asked if he knew how much he would be
willing to lose. In other words, “What’s your exit plan?”
He didn’t have any.
He still held it when AAPL went back to the May 2012 low (around $500). When this happened, he
started to ask for my advice.
I told him to sell if price fell below $485.
He was overjoyed when the price bounced quite strongly from the level $500. He even considered buying
more stocks to “make some of his losses back.”
Of course AAPL did bounce…
…before it went back down to $500 and further below.
When it was at $480 I asked him if he had already sold the stocks. Now he adamantly told me that he was
investing for a long term, so he could weather this storm.
I did not have anything else to respond except, “Mate, you ought to know your maximum pain
threshold.”
Then when AAPL hit the $440 area, he called me to tell me he that might have to cancel the wedding plan
in the Caribbean because he did not have enough cash anymore.
Of course, the fiancé wasn’t too happy about it.
I was not a relationship coach so all I could do was listen. It wrenched my heart to hear that a wedding,
which was supposed to be one of the happiest days for two people, got very close to be called off
because of a single paper called stock.
Wait, there is no paper any longer—just numbers on your screen.
My friend still did not sell. Maybe he just needed someone to listen to his agony. Maybe there was some
kind of magic potion in AAPL stock that could make a 300-point loss bearable.
I did not hear from him again until few weeks after. He stormed to my apartment one Sunday and told me,
“I am done with this bullsh*t. I am selling it tomorrow.”
I looked up at my chart and I saw AAPL sitting at near the $380ish level.
 The reversal of Apple in 2013

I was not the best stock “chartist” in the world, but, even then, I realized that there was a possibility that
AAPL had formed a bottom.
The fact that my buddy looked desperate and distraught did enough to confirm my conviction.
Why? Because, in the market, sharp reversal of the trend usually occurs when people have reached the
point that they feel unbearable fear and pain. Remember the first quote from Jesse Livermore on how the
market is designed to fool most people?
So I told him, excuse me I YELLED at him, that he had to hold on and to only sell if AAPL breached
$370.
And the rest is pretty self-explanatory from the chart below.
 AAPL bounced strongly from that level and created a NEW ALL TIME HIGH in 2014

That black arrow was the point where my buddy wanted to get rid of the stock.
And that guy still hasn’t treated me to a drink. I didn’t even get the invitation to the Caribbean.
Darn.
Have you seen, or heard about, a similar situation to the one above?
When it happens to a person you really know, it leaves lasting impression on you. I watched my buddy’s
erroneous confidence when Apple went below $650, his dilemma when the price went down 100 points,
his exasperation when the stock lost ANOTHER 100 points, his exuberance when the price bounced a tad
from $500, his disappointment when it went back to $500, and his desperation when it broke $500 and
kept making new lows.
I vowed I would never ever put myself in that situation. It was a far too hardcore and stressful way of
speculating.
Unfortunately I was sure, very sure, that my friend was not the only one.
Why did the situation happen? Furthermore, how can we, as small retail investors, prevent this situation
from happening to us?
By getting our timing right.
Now, we are not being delusional or thinking we can time the market, let alone beat it. No one does.
However, investing or trading without any sense of timing is the very essence of gambling.
And we all know what happens to gamblers everywhere.
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when
others are fearful.”

Warren Buffett

 6
Know When to Exit When You Are BOTH Winning and Losing

“Always remember; you can win a horse race, but you can’t beat the races. You can win on a stock, but you
cannot beat Wall Street all the time. Nobody can.”
Jesse Livermore

One of the worst feelings in the market occurs when we see the price of our investment (stock, future, or
commodity) go down right after we buy it, or bounce back up right after we sell.
Many people get frustrated when the securities they invest in turn out to be a winners…only for the first
few minutes before the price reverses and the profit-loss number turns red.
On the other side of the equation, many people get equally frustrated when they decide to cut their losses
and sell only to watch in horror as the price skyrockets within minutes after they clicked the ”Sell” button.
It is frustrating when we are right about the direction of the security but still get punished for it.
Unfortunately, the market never cares about us. It is up to us to enter the market at the right time.
If you are right about the direction of your investment but you enter it at the wrong time, then you will still
lose money.

Profitable Speculation (Both Investing and Trading) Requires Your Picks AND Timing to
Be Correct
We should not treat trading as gambling, albeit it would be easy to do so. I am a student of both the market
and the casino (I have spent hours playing Texas Hold’em). Unfortunately, the lingos I have heard at both
venues have been sadly similar most of the time.
By now you probably could have guessed what lingo I am talking about.
“I feel the Ace of spades is coming next!”
“It has been RED in the past five rounds. I am betting big on BLACK now. It is about
time.”
“I just beat the dealer with Black Jack twice in a row. Time to bet bigger. I have the
momentum. I am unbeatable.”
How are they be different from:
“I feel Google is undervalued. It will go up next week.”
“Facebook has been down five days in a row. It is too cheap at the moment. It is about
time the stock bounces. I am going to spend my savings to buy FB.”
“I just made a lot of money trading Apple two weeks in a row. I have to trade with more
size since I am getting good at reading the stock movement. I am invincible.”
They do not seem that different to me.
The “regret-filled” statements below are also quite popular.
”I should know Apple stock will keep going up!”
“I should have bought US Dollars when it was weak a few months ago!”
“Had I known the housing price would bounce like this, I would have purchased that
house few years ago.”
Have you ever felt, in whatever market you are investing in, that you are buying at the top and selling at
the bottom?
Or have you ever felt like you are buying too early or selling too late?
Have you ever felt that it is impossible to consistently make profits in the stock, futures, forex,
commodities, or pretty much ANY market?
Timing is inevitably important in investing whether you are investing in stocks, bonds, futures, forex, real
estate, mutual funds, or anything else.
Without the right timing, small investors like us are unconsciously gambling when we invest by “hoping”
or “guessing” instead of "calculating”. This is where this guide will be an eye opener. The message is
clear. We should approach investing with positive expectation and proper risk management instead of
“Oh, I just knew that stock would go up!”
This guide might just be what you need as an eye opener on how to make money in the market more
consistently.
Remember that the house, the casino, always wins in the long run. So does the market.
We are never trying to beat the market all the time. The only way to beat the casino is by “betting big
when the perfect hand comes” (to quote the line by George Clooney in Ocean’s 11).
That is not the intention of this book.
There is no bad investing method, but there are impractical and practical ones. My goal is to share the
latter to the world so there will be less statements like “I feel the price will go up” uttered.
Investing is not a roulette table. Investing should be methodical and measureable.
If you had a restaurant, a boutique, or any other physical business, you wouldn’t make any decisions based
on “feelings”, would you? In other words, you would not gamble with your business.
Why not extend the same courtesy when you are investing and trading?
We are not trying to act as if we know which direction the stock, or the market, will move to. All we care
about is exploiting all of the edges we have.
Combining the right time, which is one of the biggest advantages we have as private traders or investors,
with prudent risk management will go a long way.
“Let's not be part of the 85% of people who quit the market after less than 2 years.”

Steve Ryan

 7
Always Start with WHY. Why are You Trading This?
“Trading is very competitive and you have to be able to handle getting your butt kicked.”

Paul Tudor Jones

Let’s go over the investing and trading definitions again (one last ride, I promise).
***********
Investing is buying an asset (it can be a company stock, a house, or an obligation, etc.) and keeping it for
an extended time (that is usually undefined) with the hope that the price of the asset will go up in the
future, hopefully the near future.
Trading, on the other hand, is purchasing an asset (it can be a company stock, a house, or an obligation,
etc.) and keeping it for a shorter time (that is usually predefined) with the expectation that the price of
the asset will go up within the predefined time.
***********

The two definitions above, although they might sound similar, are really quite different.
Does it sound too good to be true? That’s because…it is.
Now that we know, in depth, the difference between investing and trading, we also understand how
combining the two will yield the best results for small investors like us.
Investing can give us the maximum returns on our money, but trading gives us the sense of timing. Trading
allows us to enter when the market provides us with an edge.
Even if we can get in and out as many times and as quick as we could, we still need to know when to get
in and out of a trade or investment—just like a poker player senses when to hold or to fold.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take
$800 and go to Las Vegas.”

Paul Samuelson

What Should I Be Then? A Trader, or an Investor?

Short answer: There is no right or wrong, better or worse type of answer here.
It is because every person is different in their personality (risk taker or risk averse), financial goal, risk
tolerance, family situation, and so on.
Hence in order to succeed in trading or investing, one has to:
KNOW THYSELF
The market will do what the market wants to do. Human nature barely changes. Hence the same
movements, same patterns, and same euphoria will repeatedly occur in the market.
“All through time, people have basically acted and reacted the same way in the market as a result of: Greed,
fear, ignorance, and hope. That’s why the numerical formations and patterns recur on a constant basis.”

Jesse Livermore

But our ability to control our emotions and control our thoughts comes from the understanding of our
personalities, goals, tolerance, degrees of insecurity and more.
We will not turn this section into a psychology lesson. That is for another time and another book.
For now, however, understand that there is one problem bigger than the market.
Ourselves.
“We have found the enemy. And it is us.”

Pogo

So, what is the long answer to the question? Trader or investor?

This is about finding the style that you are comfortable with.
However, my suggestion is to:
HAVE THE GOAL AS AN INVESTOR, BUT EXECUTE AS A TRADER

Investors give up smaller gains now for bigger gains in the future. Traders do not care about the bigger
gains as they are looking to cash in their profit targets.
Thus, in investing, the potential amount of profits that can be made is higher, but so is the potential amount
of risk when entering the investment at the wrong time.
While in trading, the potential amount of profits is lower because traders do not give the opportunity for
the investment to maximize its potential. However, the timing to enter can be controlled to lower the risk
incurred with the investment.
The example below can give more clarity on the statement.

Investing in Real Estate vs. Trading Facebook Stock

If you have the choice, which one would you take?
Just by asking the question can yield several strong responses from many people.
The older generation might stick with real estate, while the younger generation would go with the
Facebook stock. Nevertheless, it hardly matters because both can be a good or bad investments depending
on WHEN.
Let’s use a time machine and go back to the 2004-2007 period when the US economics were “sound and
strong.” We all remember what happened that time.
The real estate price went up through the roof. People bought houses and sold them with thousands of
dollars of profits. Everyone thought making money from real estate was the way to become the rich.
These are the things people said during the Real Estate Bubble:
“Don’t worry. House price will always go up.”
“Just buy the house, rent it, and forget the money.”
“Let’s refinance!”
“It’s never a bad time to buy a house.”
As it turned out, there was a WORST time to buy a house, indeed.
The worldwide crisis, mostly caused by the burst in the real estate bubble, began in 2008. Many people
who listened to the advice above lost their money, their houses, and even their and retirement or life
savings. They lost their “good and solid” investments.
Let’ take a look at the US Real Estate chart below:
 US Real Estate Chart 2003-2014

Most people who bought houses during that time were hoping the price would go up. Most of them did not
have plans on when to sell it, how much monetary risk they were willing to take, or even how much
monetary reward they were going to settle for.
We are going back to the definition of investing. The bold, italicized, and underlined keywords there are
extended time, undefined and hope.
When the bubble burst, what followed were severe declines in housing prices which caused many people,
who had thought that they had made wise investments, to be left with mortgages that far exceeded the
house price. Defaults and foreclosures followed automatically.
We are using this example to illustrate that, contrary to what most people believe, buying and holding an
asset for a long term is NOT ALWAYS the safest way to invest.
Without a proper investing plan and without knowing how much risk and reward one is willing to take, as
well as top execution abilities, investing can really ruin someone’s financial situation.
“The four most dangerous words in investing are: This. Time. It’s. Different.”
Sir John Templeton

Now…for the better story.

You woke up in the morning and overheard the news on Facebook. The social media company crushed the
earnings estimates. You loved Facebook, although you were never an active user (hey, you have a life that
is more interesting than posting and telling your stories to the world).
 Facebook Earning Breakout

You realized that a good earnings report usually was followed by an increase in the stock price. However,
instead of jumping in to buy the stock when the market opened later in the morning (and the stock gapped
up), you took the time to login to your StockCharts.com and learned more about the FB stock chart.
You wanted to know where the Support and Resistance were, what the current Average True Range of
the stock was, whether the stock was currently Oversold or Overbought, where the 10-Day Simple
Moving Average and 50-Day Simple Moving Average of the stock were, and the Relative Strength Index.
This is practically trading. In this Facebook example, you were expecting instead of hoping.
We are going back to the definition of trading. The bold, italicized, and underlined keywords there are
shorter time, predefined, and expectation.
With the information you now had, you devised a plan to enter the trade (long the stock), determined how
much money you were willing to lose (potential risk), and defined how much money you would
potentially make (expected reward). You also decided that if within 3 months the price did not move in
the direction you wanted it to be, you would exit the trade and find another opportunity to invest.
Every action and reaction can be put into numbers and calculated. It is more than just “I have a feeling
Facebook will keep going up.” Or “I think Facebook is undervalued. It’s so cheap that we should buy it
now.”
Thus, trading is the practically the essence of entering an investment at the right time.
Now, let’s not get ahead of ourselves here. The sentence above does not mean we can time the market
perfectly. No one can unless he owns inside information or he is simply a liar.
Instead, trading complements investing because we are able to define the potential risk and optimal
reward associated with the investment at that particular moment.
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy
with the 130 IQ.”

Warren Buffett

 CONCLUSION
“If you do not change direction, you may end up where you are heading.”

Lao Tzu

If you are reading this book, then you are probably either a seasoned or rookie trader or investor.
There is no such thing as guarantee in this profession. As I quote above, 85% of people fail to be
consistently profitable traders.
***********
In summary, investing can yield life-changing profits when done correctly. What I mean by
“correctly” is by knowing the best time to enter and exit the investment.

This is where trading comes into the equation. Trading, on the other hand, requires closer control of
the risks by determining the optimal entry and exit points, calculating the potential profits, as well
as potential risks, and cutting losses quickly.
***********
Most people do not want to take the time to learn how to do trading and investing properly. They can read
all the books on the topic, yet I bet most of them will still lose money at the end of the day.
Because trading is personal. You might have heard that 90% of trading is mental. The statement is correct
because what seems to be a good trade for me can be a crappy one for you.
If that is the case, then it is only logical that one has to spend time and energy to find one trading style that
fits him and his personality.
This is the very definition of “trading done correctly”.
Most people just want to take the shortcuts. They feel that they know whether a stock’s direction will be
up or down. They happen to know a popular product, a prominent brand that is the leader in the industry,
or a company whose executives are well-known and competent and they suddenly become the expert of
that particular company’s stock.
Well, guess what. At the end of the day, though, they, you, or I…. We know nothing.
Being an investor requires extensive fundamental research. Being a trader requires extensive technical
research. Neither of these will provide a “get rich quick” scheme.
I do hope you find this book is helpful and applicable. The 2-Hour Trading System applies and executes
all the strategies outlined.
For you who are interested to learn more, let’s go to the next book:

PREVIEW
Charts Don’t Lie: 23 Untold Chart Trading Shortcuts: How to Make Profits Quickly and Safely in the Market
 4
Defense Wins Games in Trading

“I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”
George Soros

In sports and war, there is a philosophy that states “Good offense is the best defense.”
In trading, that very similar philosophy will get us killed.
No offense to the people who believe in the philosophy. I myself am a firm believer of such philosophy.
Just not in trading or investing.
I dare to say this because I am the prime example of how that philosophy will get traders slaughtered.
First, this “aggressive attacking” philosophy caused me to trade ahead of the market. For instance, I saw Facebook was nearing its support
level, and without waiting for bottoming formation (or confirmation of reversal), I purchased the stock.
The price went down further 1 point (remember that supports and resistances are NOT exact numbers but they are AREAS instead) and
I got stopped out, few moments before the price bounced.
Second, the philosophy caused me to trade in oversize amounts. Once I reached certain confidence level, I entered trades with more size and
sometimes, the bigger size deteriorated the Reward to Risk Ratio. Instead of scaling my position, I purchased the whole size when the price
action was still choppy.
They did sound like good offensive moves, didn’t they?
Perhaps, but let me tell you. Even the most beautiful offense will not make you feel better if your bank account stays in the red zone.
The philosophy also caused me to be prone to overtrading. I might trade the right size but I did not trade optimally, which meant I took
“mediocre” trades with not-good-enough or even bad Reward to Risk Ratio.
Market requires us to focus on our “defense” instead of worrying about our “offense”. None of us know where exactly the market will be in
the future. Up, down, or sideways.
Not even the Great Phil Jackson, Gregg Popovich, Bill Belichek, Vince Lombardi, Bobby Knight, Sir Alex Ferguson, Jose Mourinho, Coach K,
or John Wooden.
The best we can do is entering a trade that allows us to take a minimum risk while taking maximum reward.
Preserve your capital as fierce as you can possibly imagine. Defense wins games in trading.

Trading is a business and should be treated as one.

5
Don’t Ask, “How Much Can I Make From This Trade…”
“Give, and it shall be given unto you.”
Luke 6:38

Risk management plays an important part again here.
It seems a bit contradictory. After all, we entered a trade solely to make money. We dream about how much profits we will make when stock
ABC hits XYZ number.
The truth is the market is never going to be straightforward. It is never going to be easy.
Otherwise, millions of people will be billionaires already.
The market is vicious and full of traps. And do not forget, we trade against the mammoths and Goliaths of the market. All those Goldman
Sachs or JP Morgan traders, not to mention other private equity funds and money managers, plus High Frequency Traders make the market
is one complete big mess.
Hence, the Risk to Reward Ratio we discussed in Rule # 3 becomes a necessity.
The only way to win is by protecting our capital as best as we could, take prudent risks, and live to fight another day if the market triggers our
stop loss.
Many people ignore the last part and instead, they hold on to hope that the market will eventually agree with them.
Nope, the market is hardly on agreement with us. The market is not arguing with us too. The market is just completely oblivious towards our
existence.
Hence, it becomes our responsibility and job to agree with the market. It is never the other way around.
{END OF EXCERPT}

Do you like the excerpt? If you do, please feel free to check the book
along with some other good trading books.
Charts Don't Lie: 3 Gambling-Proof Trading Actions...That You Should Master and Prepare Before You Even Start Trading
***Forever FREE***
Zero to Trading 100: Good to Great Trading: 7 Secret Insights to Make Money Consistently In The Stock Market
Zero to Trading 101: Disciplined Trading: 21 Secrets on How to Trade with Confidence in the Stock Market
Zero to Trading 102: Leverage Trading: How to Own (or Sell) Expensive Stocks for Less…and Make Money with One Simple
Strategy
Charts Don’t Lie: 4 Untold Trading Indicators: How Everyone Can Make Money In The Market With Technical
Analysis
Charts Don’t Lie: 7 Secrets Of Trading System That Works: How Everyone Now Can Make Money In The Market
Charts Don’t Lie: 10 Most Enigmatic Trading Price Actions: How To Exploit Market Price Action Anomalies When Day Trading
And Swing Trading
 Charts Don’t Lie: 23 Untold Chart Trading Shortcuts: How to Make Profits Quickly and Safely in the Market
Rich Traders Poor Traders: 17 Secrets Why Only Few Traders and Investors Can Make Money
Think and Trade Rich: 12 Untold Insights On Fundamental & Technical Analysis to Make You Money in the Market
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I APPPRECIATE YOU
Thank you for downloading and reading this book. I appreciate your time and money you spent, and more
importantly, I appreciate you as a person.
If there is anything I can do for you, please let me know. Send me an email or tweet me if you have
questions on trading. Maybe you want to see how I read certain stock charts?
I will do my best to respond and to help.
It is my sole intention to help traders and investors to unshackle themselves from trading fears, remove (or
at least, reduce) their trading stress, and (hopefully) make more profits.
I am only a small trader in the enormous pond full of great market players. It means the world to me if you
can kindly leave a review for the book you just read.

Review
If you don’t like the book or don’t feel that the book is helpful, please contact me at
mailto:steve.ryan@zero2trading.com
I would be happy to take any suggestion you have for me.
If you are an investor and/or trader, and happen to enjoy readings on business and money, the website
Zero2Trading.com will come handy for you as I guarantee the stuff you find will add values.
Let’s keep in touch via Twitter (@zero2trading) or StockTwits (@zero2trading). If you have financial thoughts,
market opinions or stock opinions, shoot me a tweet.
Thank you for downloading and reading the book.



ABOUT
“An investment in knowledge pays the best interest.”
Benjamin Franklin

The writer of this book is just a normal guy like everyone else with high interests towards the world of
personal finance.
Steve Ryan is a private trader and investor, with US stocks and ETFs as his primary focus. He believes in
diversification based on asset classes. Hence his investment in properties and his current vocation of
establishing his own business.
Ryan invests in stocks, bonds, real estate, and mutual funds. He, however, believes his best investments
are in his work-in-progress business and his knowledge on actively trading the market. Knowledge is
power, and in the world of investing and trading, that is THE truism.
When trading, Ryan focuses on trending and momentum stocks. After wasting close to $13,000 in
commission during Ryan’s early years trading, he trades only liquid stocks nowadays.
His main method is scanning 250 stocks every night to find out the potential opportunities the next day.
Ryan then looks for the best setups that would allow him to go for the maximum profits.
It took him exactly five years to be a consistently profitable trader.
When he is not working on his new business, writing, or trading, Ryan can be found reading books about
business and money, drinking coffee and/or a little bit of alcohol, traveling, playing basketball or football,
watching sports, working out, and hanging out with his old and new buddies.
 Table of Contents
PREFACE
GET THIS BOOK FOR $3.49 $0
THE 2-HOUR TRADING
1
A Person can be Smart, but People are Generally Stupid
2
Some Trading Rules Are Meant to Be Broken
3
Repeat This Again and Again Investing is NOT Trading
4
Strive for Opportunities with Disproportionate Reward to Risk
5
Buy and Hold Strategy can be Hell Sugarcoated as Hope
6
Know When to Exit When You Are BOTH Winning and Losing
7
Always Start with WHY. Why are You Trading This?
CONCLUSION
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I APPPRECIATE YOU
ABOUT