TRADING 101

With the growing popularity of trading, I felt like sharing a couple of base principles, tips and tricks I’ve
learned across my years to get you started. I’ll only cover the basics so feel free to dive in deeper on the
subjects that you’re interested in. Remember that in trading like in sports you’re only as good as your basics.
The internet is a marvelous place with tons of free resources for you to educate yourself so use it and go in
depth on any notion you’re interested in.

Making this guide I felt very grateful for all the free lessons I’ve received from my peers and colleagues all
these years. From the day I started till now, I’ve been surrounded by great traders giving tips and tricks and
lessons for free. A big thankyou to you all for your time, and here is my modest contribution to helping
everyone trade a bit better.

Let’s get to it shall we?

We’ll start with a simple question: What is trading?

Well trading is simply the act of exchanging one product (Of any kind) for another with an entity. This
exchange is often realized through a system that we call a market. I’ve taken the broad definition because I
want you to understand that what you’ve been doing with stocks or crypto you can do with shoes or apples.
Once you master trading it doesn’t matter what you’re exchanging, as long as you understand it, you’ll turn
a profit.

In our specific case, we’ll talk about trading financial products (More specifically: Stocks) in the stock
market. For these kinds of trades, as an individual you can either be a Trader or an Investor. Plenty of things
differentiate the two, but if I were to simplify: A trader uses market volatility and conditions to turn a profit
on the short-term movement of an asset, whereas an investor uses the potential and expectations of the
economy to turn a larger profit on a longer-term investment.
So, which one should you be? Well, that depends on your profile, market conditions, the time you have to
allocate to this activity etc. But in my opinion, the right answer is: a mix of both.

Why should I be interested in trading? Or the stock market? Or finance in

general?
The stock market and finance usually get a bad rep. We all know stories of people who lost a lot of money
buying XYZ, people saying it’s the biggest casino in the world, or that it’s just gambling and that the house
always wins. Most of those rumors usually come from people that wanted a “make money fast” scheme and
didn’t take the time to do the proper work and preparations before diving in. If you go swimming and you
don’t know how to swim, you’ll most certainly drown. If you try to play basketball and you don’t know the
rules, well you probably won’t enjoy your time and almost certainly loose. Same goes for the stock market.
Taking the time to get educated, training with a bit of cash before going in bigger will make the experience
much better.

Understanding how to trade, invest and have a better grasp of your finances will help you live an easier life,
because finance is a huge part of your everyday life and of your future. In 1994 the movie Forrest Gump aired
for the first time. In the movie, Forrest makes his money investing in a “fruit company” called Apple (Yes, THE
Apple AAPL). If by the end of that movie you’d have bought 1000$ in Apple shares you’d have a 6 figures
account today. So, get involved in your finances and don’t let the banks make money off of your hard-
earned cash by letting it die in a saving account.

So, what do I do?

Let’s start by focusing on the products. Financial markets have a lot of products to pick from depending on:
your risk profile, what you’re interested in etc. Here we’ll only talk about stocks (And cryptos for a bit). Any
notion that you learn here could be easily transposed to any product you want to trade. Be it in the financial
markets, crypto currency markets, housing markets etc. what you need is to understand the rules and the
actors.

What are stocks? It’s a portion of a company that has been made public for anyone to buy. When a company
decides to go public, a group of banks do a full investigation and determine its value. Then the company
decides what portion of itself it wants to make public as well as how many shares it wants this value to be
divided by. That gives us the number of shares outstanding, the number of shares available to the public
(we call that the Float) and the price.
Simple right? So, a stock is basically an invisible piece of a company. You can own it to expose yourself to its
earnings and performance through dividends or increase in share price. The more shares you buy in a
company the louder your voice becomes and the more you’ll have a say in its day-to-day operations (Stock
holders may vote on issues, decide on a CEO etc.).
The stock is then listed on a stock exchange (NASDAQ, NYSE, AMEX, LSE, EURONEXT etc.) which functions as
a continuous auction, easing the exchange of assets between participants. Some stocks aren’t listed on an
exchange, either because they do not meet the requirement to be in a centralized exchange (And therefore
got delisted), or because the company does not wish to be listed. they are called OTC (Over the Counter) or
pink sheets.
What are crypto currencies? Crypto currencies are a technological attempt to create a new kind of digital
exchange method devoid of all the drawbacks current currencies have. Each crypto currency has its own take
or form of variation on a technological stand point, as well as main features and characteristics that the
currency should have. So, when you’re buying a crypto currency, you’re buying a technology in hopes that it
gets widely accepted and becomes an established currency that you can trade for goods anywhere in the
world. Expectations are high and the possibilities are endless. As an investor it is your job to get acquainted
to the best of your knowledge with the currencies you wish to invest in, how their technology work, what are
the goals, expectations, future etc. and what does the competition looks like.
Okay great but what do you need to trade?
First you need money! (What a surprise am I right?) any amount will do; stock prices range from a few cents
to a couple of thousands of $ a share. Then you need to open a brokerage account, it’s an account that’ll
allow you to buy and sell a certain number of financial products. Every brokerage account is different, things
you’ll have to keep in mind are: At what time is your broker open or closed for trade. Is there a commission?
What types of products can you buy? Etc. Every broker has strength and weaknesses. If you’re starting out
and are from the USA the one I’d go for is Webull, the interface is nice and legible they have a great range of
products and tools to get you started.
For non-US I’d suggest Interactive Broker, though they have commissions they’re the best when it comes to
an all-around package and offer a lot of great in depth options. Again, all of this is my opinion, do your own
research.
Now you just have to wire money to your brokerage account and you’re ready to go!

Let’s continue with the basics: How do I buy whatever it is that I want to
trade?
First start by typing in the ticker of the asset in your broker: a ticker is an abbreviation by which you can
uniquely identify most products, for example: TSLA is Tesla TLSA is completely different (Make sure the data
is in real time, that you’re indeed looking at the correct asset listed on the correct exchange. Don’t hesitate
to double check online at first, we all made silly mistakes). Once you’re looking at the right ticker, you’ll want
to direct your attention to the bid and the ask. The bid is the highest buy order currently open for the
position (i.e., the most someone is willing to pay to buy the stock) and the ask is the lowest sell order
currently open for the position (i.e., the lowest someone is willing to sell the stock to you for). The difference
between those two numbers is called the Spread (The bigger the spread the more volatile a stock will be).
The current price is the price of the last transaction. Each of these numbers will be accompanied by the size
which is the number of shares that are being bought or sold at said prices.
For example:

This data is called Level 1 (Lvl 1). Further information on current open orders around bid and ask can be
found (sometimes for free, sometimes as a paid service) on your broker and are called level 2. In general,
you’ll want to trade using level 2 because it allows you to accurately see the action on the asset you’re
trading, but if you’re just starting stick to level 1, you have a lot of things to master before leveling up.

To sum it up level 1 and level 2 allow you to understand who is buying/selling the asset you’re interested in
and at what price. Now it’s time to use this information to place your order. There are two main types of
orders, all the others are variation around them: Limit and Market.
Limit means that if you want to buy or sell a stock at 42, you’ll get filled at 42 or lower for buys and 42 or
higher for sells.
Market means that the broker will find an order to match your amount at any fair market price. You guessed
it? DON’T USE MARKET ORDERS! There is a whole section of finance dedicated to finding the slightest $ they
can squeeze from any order (That’s in part most free brokers make their money, by selling your orders to
funds that’ll make money using high frequency algorithms) so try your best not to use them. Limit orders
give you mastery over your trading. You know the price you’ll pay and can infer your risk from it.

So, you have your order up now what? Now you get filled! It’s a living market so if you buy or sell something
you’re buying or selling it from/to someone else. If the price shown is 50$ and you have an open order for
that amount, but no one wants to buy at 50$ your order won’t fill until someone does want to buy at that
price or you modify it (That’s exactly the type of cases where you use level 1 and 2 to place the correct
order).
Some other orders types are:
The stop order: It’ll trigger an automatic sell order (Market or Limit if you’re using a stop limit) once the
asset gets below a certain predetermined value.
All or None orders exist so that you either get filled for the entire position or none at all.

For any order you have to setup a time frame. The default one is a day (meaning your orders will be closed at
the end of the trading day). You can set it to GTC (Good till canceled) which mean the order will stay open till
you cancel it or get filled (brokers usually allow a maximum of 60-90 days)
Not all brokers allow for every type of orders so get informed.

The Market is open every non holiday week day from 9:30 am to 4pm ET. It also has extended hours from
4am to 9:30am for the Pre-Market and from 4pm to 8pm for the After Hours. Check the hours your broker
operates in, not all of them are open for the fully extended duration. Be aware if you want to trade
extended hours, you’ll have to issue specific order types, and liquidity might not be the same.

You can also choose to sell stocks that you don’t have by borrowing them to a broker for a fee. That is called
Shorting. You’ll want to do this if you expect the price of an asset to go down. Hence you sell 10 shares of
XYZ that you borrow from your broker @100$ each. You now have 1000$ but owe 10 shares to your broker.
If XYZ goes down to 90$, you can rebuy those shares (it’s called covering your short position) and you’ll have
made 100$.
Shorting is an important aspect of trading but also very risky. When you buy a stock, your risk is the price of
the stock (So if the stock goes to 0 you lose all your money) but you reward is infinite because the stock can
go to any price up. On the contrary when you short your reward is the price of the stock (If price falls to 0
you gain all the money you won by selling the stocks you borrowed) but your risk is infinite, because if the
stock goes up 1000$ you’ll be forced to buy it. As such brokers protect themselves by forcing you to cover
your position when it gets too risky, so be careful (This is called a Margin Call).

Now you know the basics let’s dive a bit deeper: How to pick an asset:
I’d love to tell you that there is a magic formula that’ll ensure that you win every time but truth is, there is
not. However, there are several methods, rigorous rules and discipline that will ensure that you win enough.
What do I mean by winning enough: Let’s say you’re trading with 1000$, every time you win you earn 100$,
when you lose you lose 50$. To turn a profit, you only need to be right more than 33.4% of the time. If
you’re right 50% of the time on 10 trades, you’ll make 250$. This example is here to show you that it’s more
about the discipline and learning how to take a loss and book a profit than it is about picking the right stock
and having the perfect idea.
When I was starting, I thought it was all about the quality of the call, how smart the idea, and although it
plays a part, the single most important aspect of making you profitable in trading is your EXECUTION of a
trade. This is why the first thing I want to teach you is how to make a PLAN. The more complete your plan
the more control on your trading you’ll have and the better you’ll be able to execute. Plans aren’t everything
though, your nerves, your experience and how comfortable you are with the asset you chose will also play a
HUGE part in how big your profits are. Always remember to trade only if you are in the correct mindset,
grind those gains, stack them and before long you’ll have a nice big happy pile of cash smiling at you.

So how to make a plan: Step one let’s familiarize ourselves with charts.
You can find the chart of a stock by typing the ticker anywhere on the internet. If you want detailed charts,
you’ll have to use a broker or specialized websites like Trading View etc. A chart is basically the price history
of a stock, a record of all the transaction that’s been made in graphical form. When you first see a chart,
you’ll see this:

This is wrong, if you want to be serious about your trading, don’t use line charts, use candle charts. Candles
are a much better way of understanding what happens to a stock, because they’re more dynamic and paint a
better picture of the movement than a line.

To understand a candle it’s simple, each candle represents

the unit of time you’ve put your chart in: If you use 1min
charting you’ll have candles that represent 1minute, if you
use 1 day charting, they’ll represent 1 day. The color of the
candle indicates if the candle closed higher or lower than it
opened. At the start of the candle, you have the price, if the
price goes down and finishes lower than it started after 1
min the candle is RED, if it’s higher it’s GREEN. Those two
points (Open and close) will make up the body of the candle,
and any variation outside of them will be pictured by a line
called the wick (it’s possible for a candle not to have a wick).
See picture on the next page.

The shape of a candle can give you a lot of information, I picked this picture from the internet (Source on it)
so that you can familiarize yourself with the main ones. For info Bullish means that you’re expecting the
stock to go up, bearish means you’re expecting it to go down (Synonyms: Bullish, Long, upside; Bearish,
Short, Downside).
I won’t go too much into details about candlestick patterns, but I advise you to get the basics from the
internet or from books. I personally trade with the basics because I find other tools to suit my style better.
Some traders are able to turn a big profit from trading mostly candlestick patterns. If you find that this is
something that suits YOU, please don’t hesitate to dive deeper.

Another important thing to have on your chart permanently is volume. I prefer to have it below the chart as
a bar chart so I can check the detailed numbers. Volume is simple it’s the number of shares exchanged
during that period of time (Again on 1min chart it’s the number of shares exchanged in one minute). Volume
is an indicator. There are plenty of indicators that you can access and put on your chart (It’ll depend on your
broker but the main ones are pretty common). They range from fairly straightforward to very complicated.
The choice of indicators is up to personal preference, but I can give you a couple of advices: First of all, don’t
clutter your chart, you don’t want it looking like a Christmas tree, the most important thing is legibility.
Don’t go for too much of the same type of indicators. There are three types of indicators:

• Trend indicators: When the chart starts showing the price settling in a particular direction (Up or
down) it’s called a trend. Trend indicators are there to help you confirm that there is indeed a trend
and the direction it’s going.
• Volatility indicators: Volatility is a measure of the range the stock price can move during a set period
of time. The higher the volatility the bigger the swings, and the easier it is to make money (And to
lose money). Volatility indicator will help you identifying high and low volatility periods.
 • Momentum indicators: Momentum is the measure of how fast the stock price is moving in any
direction. They are very important to gauge the strength behind a move in stock price and are the
best indicators to confirm a stock move.

We’ll come back theses notions later because they are very important. Usually, you will want at least one
indicator of each type. Try and pick ones that are complementary (Meaning that they confirm each other).

My pick of indicators is the following:

Volume, VWAP
For Trend indicators: 50MA, 20EMA and 200EMA.
For Volatility Indicators: Bollinger bands
For Momentum indicators: RSI and/or MACD.

And this is a nice segue into Technical Analysis:

What is technical analysis?

(Let’s call it TA cause we tight me and her) It’s the analysis of the technical aspect of a stock (Namely the
chart and most of the information you can gather out of that (Volume, order flow etc.). “But I’m bad at math
and it seems like a headache is it even useful?” It is! And it’s not.

Technical analysis is a support to help you understand trends, levels and predict movement. No technique is
absolute, no indicator is better or worth, use what you like, what works for YOU. Some of the main
indicators are (Keep in mind that most indicators are based on a number of candles so MA 200 is the moving
average based on the last 200 candles. If you’re on the 1min chart or the 5min chart meaning 1 candle is 1
minute or 1 candle is 5 minutes it’s not the same):

➢ Moving averages: It’s the average price of the last X candles (MA 100 is last 100 candles) without
accounting for huge variations. Very useful to put a stock in perspective of its historic values. A lot of
different type of formula exist to calculate moving averages. My favorites are exponential moving
averages (EMA) because it applies an emphasis on current data.
➢ VWAP: Volume weighted average price: easy it’s the price weighted by the volume, so if one share
was bought at .1 and 9 shares were bought at .5 VWAP will be along the .46 line (True formula is
more complicated). It gives you an idea of the avg price of where people bought and what their
average price look like.
➢ RSI: Relative Strength index, it tells you how much a stock can bench… Yeah, I’m not funny so what?
It tells you if a stock is oversold or overbought. Over 70 is overbought under 30 is oversold. Again, it
depends on the time period. Most used one is RSI 14.
➢ MACD: Moving average convergence divergence, as the name suggests it shows the relationship
between two moving averages. A slower one: the Signal line (Bigger time frame) and a faster one the
MACD Line (Smaller time frame). Basically, if the faster one rises above the slower one stock is
gaining momentum and if it goes below, it’s losing momentum.
➢ BOLL: Bollinger band, new fancy RSI, basically tells you if a stock is overbought and oversold and if
it’s trading off channel, if it’s into the upper band it’s overbought, lower band oversold.
➢ ADX: Average direction index, one of the best if not the best trend indicator. It ranges from 0-100,
the higher the number the stronger the trend.0-30 indicates a weak trend or no trend at all 30-60
 indicates a strong trend and 60-100 a very strong trend. ADX doesn’t give you the direction of the
trend just its strength.
➢ Volume: Tells you how many shares were bought per unit of time

There are many others, I advise you to read into this. Investopedia and YouTube have a great deal of
resources. Find the ones you feel comfortable trading with. The ones that give you the information you need
without headaches and make your setup. Colors are also important. You want to be able to see at a glance
what you’re looking for, so take your time and do things properly. Here is mine, I usually hide MA and RSI
unless I’m looking at swings but I put everything up to show you.

All technical analysis techniques are just fancy ways of interpreting the flow of a stock, if it’s going to go up
or down. Best way is still to get acclimated with the stock (Watch how it reacts to volume and to certain
patterns) so you know what to expect. It’s a great tool, but that’s just it, it’s JUST a tool. It will all depend on
you, how you use it. Having the best tools won’t make you the best trader, but you’d be nothing without
your tools. So, study them, respect them and deepen your knowledge of technical analysis any chance you
get. I know it seems like we’re straying away from the whole plan business but trust me on this, it is part of
the journey.
Let me give you some hints on how to use these tools.
When looking at a chart you want to identify some important areas:

Trending areas: Look like this:

These are extreme examples, trends take a lot of forms: long

term trend, short term trend, very steep up/down trend or on
the contrary softer ones. The important point is that the share
price is going in the same direction consistently over a period
of time. The longer that period, the stronger and more
important the trend becomes.

Consolidation areas: Looks like this:

Consolidation is a sort of digestion of a move. It basically means

a period of time when people aren’t really interested in a stock
but still hold it at a certain level waiting for significant changes
or news. Consolidating areas are important because they
highlight the key supports on a chart. Levels at which people are
comfortable buying and sellers are not interested in selling or shorting the stock.

Ranging areas: Looks like this:

Ranging areas happen when a stock hasn’t decided

on a direction so it’ll test both the upside and the
downside repeatedly until a side wins. This will be
shown by a break out/down of the range. Mastering
ranging areas can help you make consistent profits
by scalping the movements.

Usually the cycle is: Consolidation>Trend>Range>Breakout/down. A stock consolidates around a level until
it garners enough attention to start trending up or down. Then when the trend arrives at its tipping point,
the stock will range till it breaks out to a higher trend or reverses to an opposite trend.

Let’s see an example using the weekly (Each candle is a week) SPY chart (An ETF based on the S&P 500 index,
an index that is comprised of 500 of the biggest US companies and a very good image of the overall market.
More on that later). This is highly simplified but I want to show you how to identify those areas, and more
importantly, how to figure out the reason behind the movement you see (Picture Below with explanations).
Correctly identifying those areas allows for a key part of constituting a plan: the price levels, supports and
resistances.

Ask any trader if they know what a support/resistance is, 99% will say yes. Ask them to explain it and they’ll
struggle. See support and resistance are more than the technical levels you see on a chart.

To explain what I mean, let’s dive into the simple mechanism that makes a stock move: Supply and Demand.
The law of supply and demand simplified is: If more people want to buy shares than there are sellers: Price
goes up. If more people want to sell shares than there are buyers: Price goes down. Simple right?

In every stock there are 2 kinds of main actors:

People buying shares (Aiming for profits OR covering a short)

People selling shares (Securing profits OR shorting the stock aiming for it to go down).

You also have market makers (MM) to ensure liquidity. MM’s job is to always provide a buy price and sell
price. They’re not saints, the prices they quote depend on what’s happening with the stock. But they are
here to make sure that you can always buy and sell a stock at a given price, they provide the liquidity of an
asset. Understanding market makers is very important and I advise you to read up on what they are, as well
as understand how they operate because they are behind a lot of moves you will see while trading.

Let’s get back to Support and Resistance:

What’s a Support? It’s a level at which buyers are comfortable adding the stock. So, it’s a level where you’ll
have buy orders coming in. Hence “support”, they come to support the price level.
What’s a Resistance? It’s a level at which people are starting to take profits or feel comfortable shorting.
So, it’s a level where you’ll have sell orders coming in. Hence “resistance”, the price movement starts to
resist the direction it’s going in.

Now couple that with what we previously explained:

A support can be: A consolidation area (Price where people are comfortable buying but not much selling is
happening), the bottom of a range, a trend, a psychological level (Like all time low price ATL), a fundamental
level (Any price described in a filing more on that later) etc.
But also a technical indicator (For example as long as the stock is holding the 200EMA, the VWAP etc.)

A resistance can be: The top of a range, A previous high of a trend, a psychological level (ATH for all time
high price) or 1$ for stocks that are below for example, a fundamental level etc.
But also a technical indicator (For example stock finally broke through 50MA on the daily)

A couple of golden rules in trading: When past support becomes resistance, the price is preparing to go
lower (So for example if XYZ had 200EMA as support and breaks down and then if you see it failing to reclaim
200EMA it’s probably going to go lower)
Similarly when past resistances become supports, stock is preparing to go higher.
Finally whenever you want to confirm anything (A level, a trend, a breakdown etc.) no matter the unit of
time you’re in, you want to make sure 3-5 candles open and close above that key level.

Looking at a chart try to find those key price levels and begin forming a plan based on them. Technical
analysis can help you identify those levels and areas. By looking at the history of a stock you can see where
people tend to buy it and sell it. From this data coupled with the right indicators, you can try to predict
where they’ll buy/sell it now, but that’s not the whole story. An indicator is essentially a self-realizing
prophecy for example: if it's commonly agreed that you should buy XYZ on 50MA, well 50MA will naturally
become a support as people using this indicator will come buy it at this level.
With the broader definition of what a support and a resistance is at its core, you can deduce what will
happen AROUND those levels by looking at how the stock behaves. Look at level 2 (Bid/Ask) and volume. As I
said, support and resistance are just levels around which people feel comfortable buying or selling. So, if you
see no signs of buys in the case of a support or sells in the case of a resistance around those key levels: it
means that it is going to get broken. Similarly, if the volume of shares bought/sold is very different than the
volume of shares sold/bought, then it means that those levels are about to get broken as well (Supply and
Demand remember?).

I mentioned level II let me explain what it is and how you use it:
We previously explained Bid and Ask, bid and ask are commonly referred to as level 1. Level 2 basically
shows you and expanded view on that. It’ll show you the highest bids and their size as well as the lowest
asks and their size around the current price level. It will also show you the name of the exchange that’s
placing the order. Here is an example:
You can see a bunch of different exchanges (Mainly ARCA and EDGX) placing orders to buy and sell the stock
at different prices (ARCA 3.44 1000 on the bid side basically means someone wants to buy 1000 shares at
3.44 using the ARCA stock exchange. Similarly, EDGX 3.57 1000 means someone wants to sell 1000 shares at
3.57 using the EDGX exchange). Be advised that it only shows orders. The fact that an order exists doesn’t
mean it is going to stay forever or be filled. Some people like to spoof the price of a stock with fake orders
that they take down at the last second, be careful.

Level 2 should give you a general idea on the main actors around the price at any given time. This will help
you with your levels. If you see massive blocks on the bid, you can consider that as a support (Again being
cautious they could be spoofing you), because before the price goes down, this entire block would have to be
filled. On the contrary big blocks on the ask can be considered as resistance because you’d have to buy them
entirely to allow the price to move past this point.

The exchanges are also important. Depending on the type of exchange, the order will be under different
rules, thus you will be able to determine the intention of the person behind the order. But this you’ll have to
learn for each stock you trade (And to be honest it is not a priority when you’re starting).

Level 1 and 2 and tick by tick (Which shows each tick of exchange) are only useful when you are actively
trading a stock. They allow you to understand the current state of a stock in real time which will help you
more accurately buy and sell your shares and confirm your levels. Level 2 and tick by tick also show you the
volume behind a move:

When there is enough daily volume on a play or over long periods of time (Day candles). At this point begins
sort of a tennis match between longs and shorts.

This tennis match happens with the volume and you can be a spectator on Lvl 1, Lvl 2 and tick by tick, or you
can actively participate in it if your account is big enough.

For a move to be real, it has to be supported by volume. Be it a move up or move down on the chart, a
significant resistance or support break, if there is no volume and no continuation then the move isn’t real
and will very likely get reversed. Volume shows how much shares have been bought, it shows how much
people believe in this move and how much effort they put in making it happen.

The first notion you have to understand is Soaking. Soaking basically means absorbing volume (Understand
effort, picture a sponge absorbing water) from the other side of the court. Soaking is akin to defense in a
tennis rally. The other player is hitting as strong as he can and making the ball move across the court to
make you run for it in hope of breaking you. You defend tooth and nail waiting for him to exhaust his
reserves and for you to be able to take the initiative again. Then it’s your turn to attack. If you can’t defend
well enough you get tired and the support level gets broken.

The second is the attack, it’s when a side sends big blocks of volume to try to break a level and make the
other capitulate. You’ll see it on the volume by big bars appearing after a period of relative calm. On every
attack they’ll be an attempt at defense. The attack and defense aren’t set on a precise number, if the break
is 2.6 for example and it goes to 2.61 it might not be a complete break, often people put multiple walls on
bid or ask to soak so wait until you don’t see the walls anymore. A break might also not happen on the first
try their can be multiple tries (Often my rule is to allow 3, if the level doesn’t break, I look to get out because
it means the move will reverse).

The third and most important part is continuation. After a break happens you want the price action to use
the break to push it in your direction. No continuation is a strong opportunity for the other side to attack
back and reverse the move, sometimes violently.

At the start of each match, both sides have a set amount of energy they’re willing to use. The first one to get
exhausted will capitulate making the chart move big in the opposite direction. Rallies (as in tennis rallies) can
be long and happen all through the day with a different winner each time. Your role is to understand how
the players want to play and to apply that to your patterns.

Usually, patterns are a chart representation of the rally happening. Attacks will often happen at the end of
said pattern, because it’s also what people are looking for, hence ensuring better continuation. So, if you see
a 20EMA flag, a trendbreak etc. Look at volume, look at lvl 2, tick by tick; look at how bid and ask evolve and
try to understand what the players behind the move are doing. When the attack starts look at what happens.
If you see people using 10% of daily volume to try and break a level and it get soaked, we’re probably going
down so might be time to take some profits and set a stop loss. If you see big sells on a stock but the price
action isn’t moving, this might mean we’re going up soon and some big buyers are soaking trapping shorts
before making the price fly forcing them to cover.

A big move up or down will always attract shorts and longs. This is where they can be trapped and make
the move even bigger than it is (Those big parabolic moves that you see is often big buyers soaking shorts
and breaking resistances up with strong continuation forcing the shorts to cover making the move even
bigger. This can happen multiple times a day). You’ll learn a LOT of patterns looking for them. My advice is:
make a note every time you see something and when things start to repeat try to learn the ones you feel
the most confident with or make the more sense to you. Start playing small and increase your sizing with
the increase in confidence.

As I said this battle is way easier to see on a chart in real time. This is something that you use to confirm the
moves and theories that you have. This coupled with technical analysis will give you a very high win rate in
picking the best setups during the day. Also remember if you have a small account you don’t have to be
first, wait, let the big guys do the attack and buy on the break. Similarly, if you see a short getting soaked, no
need to slap the ask, bid and wait, he’ll fill you naturally.
Now you know what a chart is, how to identify key levels, and how to read
volume. Let’s transition into applications of this through very simple
patterns that you can use in your everyday trading.
Starting with the simplest pattern: The flag. A flag is a ranging pattern that prepares a breakout or a break
down. They can take many forms and be bullish or bearish. It looks like this (Picture taken from
https://corporatefinanceinstitute.com/):

Those patterns are very easy to see and to trade, you want to: buy on the breakpoint, IF the break is
confirmed. Then you hold it with a simple plan using past supports as resistances. They can happen on any
time frame and usually all trade the same.
If a flag forms for too long and is not tight enough sometimes it will fail, get accustomed to the pattern and
you’ll be able to notice them.

This is a pattern that you can trade in conjunction with your indicators. A flag will usually form with a moving
average as support or above VWAP. Usually if a flag forms far from any indicator, it’ll tend to fail.

The most important line in a flag is the top one in case of a Bullish Flag and the bottom one in case of a
bearish flag. Most brokers have drawing tools so you’ll want to try and draw them. Those lines don’t have to
be perfect but they must be representative. As always try to follow the 3 candles confirmation rule to
confirm when a breakout is happening. Then you targets can be the next indicator, New High of day (NHOD),
or any level you feel makes sense.
For example:

^You can see that the flag is becoming tighter and tighter and maintaining support on the 20EMA (Teal
line). Then suddenly you have a candle that breaks the trend. This is where you add.

^Stock continues to go up and break previous high. The resistance (Previous HOD of 0.7) becomes a support.
You can now hold with a stop at this previous support level, or using the 20EMA (teal line). Both are correct.
One is tighter (Previous level), the other one looser (Indicator), so it will depend on your risk profile.

^As you can see stock continues to make new highs. The 80c level is a psychological level (10c higher than
previous high). Usually, when approaching those levels, you want to take some profits and trim your
position before. So, try and have sell orders ready at 78c or 79c, still holding a core position in case it breaks
through and goes even higher. Your stop is still the 20EMA.
Second pattern I like to play are VWAP taps or VTAPs as I call them.

When a stock that had momentum or a decent enough trading volume, dips through VWAP for the first
time, it tends to go back to this VWAP level later in the day. For this pattern you’ll need the VWAP indicator
as well as the 200EMA and 20EMA.

You want to buy stocks that went down, are looking like the downtrend is reversing. You’ll start to consider
them if they are holding above the 200EMA, and add them once they break above the 20EMA. Then you’ll
want to look for the break levels and sell them a little before VWAP. You stop will be the 20EMA generally, if
you want to play it safe or it could be LOD as well if we are not too far. This pattern might not always go to
VWAP completely so make sure to take your profits on the way and set smart stops.

Here is an example:

VWAP is blue line, 20EMA is teal line. As you can see stock dips below VWAP very early and never goes back
up (Usually the VTAP doesn’t happen more than twice in the same day). Then you can see that chart breaks
the down trend after some accumulation around LOD (Low of Day) and reclaims the 20EMA. This is where
you can start adding.

As you notice the pattern fails multiple times. That is why we use a 20EMA stop and if you look closely, you’ll
see that we always sell for a profit or break even. But once it works the stock goes to VWAP following the
20EMA trend.
Once again you’ll have to repeat this multiple times before mastering it. As always, start small and grow
bigger in your sizing as your confidence level increases.
Third pattern the 200EMA. The 200EMA is the moving average of the last 200 candles, meaning, it tracks the
stock movement for a long time. As such it is great to use the 200EMA as risk and add stocks off of it if they
manage to hold it or reclaim it.
Any stock holding the 200EMA for a long period of time that has any other positive factor going for will very
often have a nice move in price later down the line.
Same thing a stock reversing off of lows and reclaiming the 200EMA is a strong bullish sign.

Here is an example:

Stock breaks down off of trend but still falls down to 200EMA (Yellow line) then it holds and accumulate
here. You can add into this accumulation with 200EMA as your stop.

And look at the result. Stock breaks through key levels (20EMA teal line, VWAP blue line, then HOD). What
happens here is that shorts got trapped in that big down candle mid-day, and since it never breaks 200EMA
and has very little volume, the moments the stock picks back some momentum they are forced to cover
their short position by buying, creating a move. The move is followed by volume and we get a new high.

If you time your entry correctly you can see that your risk off of 200EMA is very small, your plan is super
simple and the reward is quite big. Mastering this setup gives very comfortable trades that you can manage
easily and reproduce many times every day/week.
Final pattern is the 3rd/5th day pattern. Usually when a stock has a big move on a day, it tends to move again
in the same direction 2 days later or 4 days later. This pattern is the result of different factors that you can
track.
The first one is the liquidity trap. If on the day of the big move, you have a lot of volume exchanged and
then on the following day volume drops significantly but stock price stays relatively stable, it means that the
people that shorted this stock are trapped and can’t cover. So, any big move will force them to cover.
Second one is confidence/continuation. People and investors after a big news wait to see what are the new
support levels for a stock. If you see that the price is holding a level pretty well after a news, this could
become support and create a bigger moves as bigger fishes join in on the action.

The movement won’t happen every time, so don’t buy hoping it does, wait for volume and then refer to
your key levels. You want to buy into strength and be aware of the possibility of news filings like offering
etc. That can make the price drop very fast.

Like always this is a pattern that you will need to get used to over time, but it’s a very easy pattern to play.
Simply keep track of all the nice movers in a day and review them 3 days later in the morning. Those that
have a nice look you should keep on a watchlist with alerts at key levels, the others you don’t look at.

Usually, you’ll see the pattern present as follows:

You can clearly see the big move and volume

(Volume is the bar graph below the chart) on day 1.
Then volume drop SIGNIFICANTLY on day 2. Before
picking back up during pre-market on day 3. You can
also see that the price level holds during day 2
(Purple line is 200EMA pink line is 20EMA).
This is a stock that you’ll watch and possibly add at
open on day 3 and have as key levels the levels of
Day 1 (Especially the HOD of day 1 for a nice
breakout).

As you can see most of these patterns are a

combination of indicators, chart levels and trends.
Looking at them allow us to predict moves with a
certain degree of certainty. Combining this information with level 2 will give you a lot of insight over how a
stock is going to move.
I’ve shown you my patterns, but you’ll want to find your own patterns, get used to them and then, take the
trades only when you have a high win rate. Learn how to be confident in them, when they’re working, when
they’re not, and you’ll have a money-making machine. As always to learn a pattern start small and grow in
sizing as you gain confidence.

Now that you can spot and understand the technical aspects of a chart, let’s go behind the chart and focus
on what you’re actually buying. When you buy a share you buy a slice of a company, so of course you’ll have
to understand the company behind what you’re buying if you want to improve your trading.
This is where fundamentals come in play.
Simplified, fundamentals are all the information that contribute to the valuation of the company. So, you
could say most of the financial information (Debt, equity, cash on hand etc.). They are an essential part on
determining the value of a company and thus are one key component of its share price. I will not dive in
each of the components but you should get familiar with them.

Fundamentals will help you understanding the base level a share price can go and how the company will
behave. A market capitalization lower than the cash reserve will often mean the company could be bought
and will/should be trading higher. A company with good fundamentals will often be a safer investment than
one without. News of a 50M$ contract for a company with a 50M$ market cap will send the share price fly
very high but for a 50B$ company it’s not as big etc. In the small capitalization world, you should expect lots
of debts, because that’s how a company leverages its capital. Often those companies are working on getting
a product out and have little revenue so they need cash. That’s also how you can spot an offering coming.
Since they need cash to keep on functioning, if they have little or no reserve, they’ll be more likely to drop an
offering especially on a price hike.

The most important elements you should watch for are:

A company’s debt: the lower the better, you want it to have less debt than cash if possible or at least less
debt than the current market capitalization. The higher the debt compared to the market cap the higher the
chances of bankruptcy.

A company’s cash: the higher the better. The more cash a company has the safer you are from offerings and
the more likely she will use it on something good (Like an acquisition etc.). You want cash rich companies
especially if they are trading below their cash value, because they tend to go back to that price.

A company’s float and shares outstanding: Basically, means how many shares is the company made of
(Shares outstanding) and how many of them are available to the public (Float). Reminder that if you buy 5%
or more of the outstanding shares of a company you have to file a 13G with the SEC and notify any stock
related action you’re going to take. For float, the lower the float the more volatile the price (Supply and
demand has a bigger impact), but also the smaller you can play. Be very careful about your sizing on those
low float plays.

A company’s earnings: more on that later.

The easiest way to find fundamentals is to go on Finviz or to read the earning reports of a company. The
deeper you dig, the more you’ll understand the company’s health and prospects as well as what they need
to do to become profitable which could help you spot catalysts.

Those catalysts come as SEC Filings and News:

A company filings and news are what set the rhythm to the stock price. They’ll almost always make the
price of the stock move up or down. Understanding how to interpret them quickly is a key to knowing how
to trade the stock. You’ll also need to learn how to dig through old filings and how to read old news. That
could get you a very clear idea of what is coming and is part of your due diligence when entering a swing.
There is about 200-500 different SEC form a company can fill out, knowing all of them won’t happen
overnight and is often useless, so I’ll focus on the ones you’ll most often see as well as the most
useful/important. First and foremost:
THE OFFERING (*spooky noises*, *woman screaming* and scene… sorry). The most infamous one of them
all. It comes in many forms: S-3, F-3, 1-A, C, D etc. (No, I’m not playing chess these are the names of the
forms a company will file depending on the type of company and the type of offering). It can all be boiled
down to a simple fact, at the given date (Not the date of the filing, the date of the offering), the company will
issue more shares at a certain price. What you need to understand is: It’s a great and easy way for small
companies like the ones we’re trading to raise capital so that they can continue to survive until they become
profitable (Literally fake it till you make it). So, is the offering bad news? Yes and no, but for you mainly yes
and for two reasons. Remember supply and demand? Guess what happens when supply becomes larger? But
the main reason is the price of the offering: that’s what you’ll have to hunt for in the document. You may
not find it right away depending on the type of offering, sometimes they don’t even give a price at all.
Usually what you’ll want to do is sell your stocks and rebuy when everything has stabilized. Always keep in
mind the price and the date of the offering. Stocks that are trading under offering prices before an offering
or even after are a great way to make money because they’ll either pop back to the offering price organically
or be pumped back to that price. One final note, when they say an offering has closed, it doesn’t mean the
dilution is over, it only means all the shares are transferred to the bookrunner.
From the filings previously mention, you’ll see a second type of event: Shelfs. A shelf is a way to prepare for
an offering. It allows the company to offer an amount of share up to the maximum amount of the shelf at
any time with little paper work. Think of it as keeping offerings ready on a shelf in your house, like pickle jars.
Anytime you need pickles BOOM offering. Shelfs, Offering and the warrants that come with it play a huge
part in diluting a stock (Warrants give the right for warrant holders to buy the stock at a given price if it goes
above a certain price before they expire). They’ll help a company raise money, which can be good in the long
run, but for short term, they’ll dilute the float and make the price go down so bad news if you’re in them.

The 10-K/10-Q: Q for quarterly and K for Kannual. These are the reports a company has to file to the SEC
every quarter. There are 3 Quarterly reports and one Annual (The last quarterly includes last quarter + whole
year). They’re often filed following the Earning report and will often be more detailed.
What are earnings I hear you asking? Every quarter, companies update their financial information, earnings
include sales, profits as well as intensive information on the financial health of the companies, as well as
updates on their projects and often on what’s to come. Earnings will often come with an Investor’s
conference call or conference to get the shareholders up to date as well as to explain some of the decisions.
Often, predictions will be made on earnings by financial institution based on a number of factors. Beating
this forecast will often mean an increase in the price stock when the opposite well means the opposite.
When dealing with 10-K/10-Q/Earnings always keep alert of the contents especially on what’s to come you’ll
very often find hints that if you link them to the correct DD can give you a good idea of exactly what catalysts
to expect in the future. Those are the report you’ll want to dig in even the old ones.

The 8-K: Oh, the mysterious 8-K, the one every trader runs to read. An 8-K is the filing of any unscheduled
change or event in the company. It can be great news, but also horrible news like bankruptcy. This one is all
about speed, if you didn’t see it coming (By doing DD and getting to know the company) you’ll want to jump
on reading it very quick to know what to do. 8-K will always be a major event, secret to making money is
knowing how to predict them and understanding what they truly mean for the share price. Sometime
market will realize a bit later that the news is actually big, allowing you to enter in the stock at a discount.
Great traders will often be able to tell how good the news is at a glance. No magic formula, just experience
and digging the company as much as possible, as fast as possible.
The 13-G/D: Simple, it’s a filing you have to do when you reach an ownership of a stock which exceeds 5%
when buying shares. For you it’s useless, but it’ll help you find the big owners of a company. Some names
joining in on the capital can trigger movement. Big names like Blackrock can inspire confidence in a stock.
Get to know the actors in the domain you’re trading and what they do to a stock (HC wainright, Sabby’s etc.)
and you’ll know how to trade them. This filing should always come as a consolidation of your reason to hold
the stock, not a reason to buy.
Also, when you see a lot of insiders changing their positions, it could mean big events are coming (If they are
selling, it’s bad news, if they are buying, could be good news). All of this is speculative though.

As I said there are many more, you want to know them, search for them. The main idea I wanted to point
out is that filings are crucial and often act as a catalyst for the stock. Knowing how to read them but most
importantly what to look for when reading them is primordial in swing trading. You’ll never want to read a
filing in its entirety, first because it’s very boring, second because it’s written in the worst language on earth:
Lawyer lingo and third because it’s useless. Learn what to find and where to look for it in the document and
you’ll be good.

A correct fundamental analysis should be done on any stock you which to hold for a long period of time. You
should have a plan of which catalyst to expect next, if the company will need to raise cash etc. Filings will
come to either confirm or deny your initial idea. Hence, they’ll modify your plan or confirm it by giving
confidence in the stock. Think of it as dating, you get as much information and assumptions on the stock and
then they get confirmed or you get surprised.

Now you have all the elements to build a SOLID plan.

First, you’ll need a stock that works for you. It can be a stock picking up volume, a bottomed chart that has
good fundamentals and a catalyst you like soon, a pattern that you like setting up etc.
To find those, you’ll want to use screeners and scanners. If you’re just starting, I suggest using Finviz and
your broker. If you’re a bit more confirmed get a paid scanner/screener they’ll give the best information.
You’ll want to set them up to look for what you’re searching for, it all comes down to preference and
experience. Again, here no shortcuts, you’ll learn as you grow.
The best way to grow is to look for patterns. First, you’ll notice them, it could be fundamental patterns
(Same bookrunner always running similar stocks, Same offering underwriter pumping it back to the price
before offering again, Group of certain bio stocks that are presenting at the same conference being loaded
together etc.) or technical patterns (We showed example of those previously VTAP, 3rd day, 200EMA etc. try
to find your own to complement your trading). When you have noticed a pattern, you want to try it out with
small size until you master it perfectly and then go in bigger as you understand it better.

After that comes the key levels: What is the support, what are the resistances, what price targets or
indicators must the price go through for it to continue on the trend. What is your stop (Price at which you
will sell)? And the timeframe you want to work on. Is it a stock you’ll keep for an hour? A day? A week? A
year? If you’re day trading the pattern and it doesn’t work at the end of the day, do you overnight? If you’re
swinging something and it goes on too long, do you keep it or move on?

Alright, time to pick your add point: How should you add? If the stock is moving fast and you feel confident
in chasing you should buy the ask but most of the time you should bid the price YOU want to enter at. If it
never goes back to this price, it’s okay, there is always another play, you trade on YOUR terms. On stocks
where you’re unsure of the current price level, you can try to place what I like to call Fish Bids. Basically, bid
significantly lower than the current price to catch any big knife. If you get filled great, you’re in at a great
average, if you don’t it’s okay, move on to the next play.

Then you choose your sizing. Sizing is the number of shares you choose to buy and sell of a certain stock. It’s
one of the most important notions in trading.
It depends on: Your risk factor, the current volatility and liquidity of the market and of the asset you’re
buying, the general trend going on in the specific sector you are playing and how much money you want to
make.
What I mean is your sizing shouldn’t always be the same. It varies with market conditions and momentum.
I’ll give you a simple example, if you knew 100% a stock is about to have a 10% run in the next hour, how
much stock should you buy in account %? The answer is simple 100%, as much as you can! Why? Because NO
STOCK is guaranteed to give you the same return in the same amount of time, so it is the play that’ll make
you the most money. It’s an extreme example but you always have to think like this. How much of my money
is working for me and how much isn’t? Cash is also a great position; it doesn’t gain you money but it doesn’t
lose it either. So, 0 risk 0 reward which is a great play sometimes, especially when the market is
unpredictable or bad. Cash also allows you to enter other trades so it's an important resource. As there is
always an opportunity out there, you’ll always want to have cash on hand to enter it.
You have to size according to risk. How much money you would lose if the stock falls and how much you
would win if it goes to the first resistance according to your plan. On a 50/50 risk reward you shouldn’t risk
much. On a 0/100 risk reward you should put in all in.
Always try to go for setups that you have high percentages and experience on. This way you know how to
manage your risk and can size comfortably. As a rule of thumb, I like to say no more than 20% account in a
play unless you’re 100% sure (Not confident, sure). Also, no need to buy your full size on the first add, buy
in blocks (Usually I do 1-10K shares blocks so I can easily calculate my P&L).
To finish with you should size according the volume of stock you’re buying. What I mean is if you see that a
stock is only trading 100K shares every day, you’ll have troubles selling a position that is bigger than 20K
shares. Liquidity is very important, it allows you to stay nimble, to get in and out quickly and with little
damage. If you’re trying to sell a big chunk of an illiquid stock, you’ll make the price dip a LOT and lose a LOT
of money. Keep in mind that catalysts will often attract a lot of volume, so if you’re holding waiting for a
catalyst, look at previous news and how much volume they had. In a nutshell, look at the float, look at daily
volume and size accordingly.

After all this is done you should have something like:

Added 25% starter (10K shares) of XYZ @2.21$, swing it into 19 November catalyst.
2.01$ stop (52W low)
Targets 2.52 break for 2.7>3.1>4+

Or something like

Added 5K shares ABC @3.05$ for VTAP into EOD (End of day) 20EMA stop, 3.2 break (The level it has to
break) for 3.5$ then VWAP. Will trim some on the way.

These are examples of plans. When you’re starting out, I suggest writing them down, and when in doubt,
just read your notes with the plan on it. A plan should be both Static (Always follow your initial plan) and
Dynamic. With the additional information you’re going to get you can update some levels, change your stop,
your holding timeframe etc. The dynamic part will come with experience.
When a play has broken a key level for example you can use that as your new stop if you feel it becoming a
support. This way, you’re not losing money. If you see a stock struggling to break a resistance you can sell
some before your initial target etc.

So here we are. You got your broker setup, you got the right indicators, the right ticker, the right plan, the
right size, you’re ready, now how do you sell?

How to sell and place your stop?

Selling is up to your style. Some like to sell the entire position when it reaches high enough, some sell bit by
bit at key points, some use stops etc. Me I like to do something called: trading around a core. Basically, it’s
when you have your big position and you add and sell blocks at the planned key levels (Add on supports, sell
on resistances according to the plan you made). Meanwhile you still keep a core position in case a big
breakout happens, or if the stock starts going parabolic. This way, you stack gains on a position making it
almost free. If every time a stock goes to a key resistance, you sell 25% and make a 10c gain per share, once
you do this 4 times, the stock has to dip 10c BELOW the add price for you to lose money.

Once the move starts going, I like to use a dynamic stop. You could use this for everything and complement
the selling at key levels with a bit of technical analysis. Let’s make it easy. When your stock is moving it can
be one of 3 things:
Reversing
Trending
Breaking out

Let’s start by Trending. Usually, you add a stock on an uptrend. An uptrend symbolizes growing interest in
your stock. The more interest it garners, the more momentum it gets, the steeper the trend will be.
I will qualify the first, oldest and less steep trend as the soft trend and the steepest, newest one as the hard
trend. For trending stocks your stop is simple, it’s the trend. Trend can be: a line, an indicator etc. we’ve
already explained it previously.
If you’re swinging it then the softest trend is your stop but don’t hesitate to use harder trend as stop so you
can book some gains on spike and reload when your trend is tested and holds.
On a day trade/scalp, the harder trend is your stop.

For Reversing stocks, it means stocks that were in a downtrend and break the downtrend getting ready to
go on an uptrend (Forming a sort of V or L, it’s called a recovery) your stop is simple, it’s the low of the
downtrend the stock was in previously. Usually since you’re adding when the reversal is confirmed you’re in
higher. This will be your stop UNTIL the stock settles into a trend and then, well you just have to follow the
rule about Trending stocks.

For stocks that are Breaking out, or are breaking significant resistances, well you want to first confirm the
break (Meaning make sure that the break is done so at least 3 candles OPENING and CLOSING above the
resistance) and once the break is confirmed, your stop becomes the resistance (Or slightly below you
basically use the resistance as support) A stock that’s breaking out is usually trending, so your stop is the
CLOSEST one to the current price. and then you can reload on either support test or trend test depending on
which is below.
Usually, a stock follows the pattern Reversal>Trending>Breaking Out. Couple that with your levels and you
have very simple sell points. What I’m saying is basically you hold as long as the stock moves in your
direction then sell when it stops. After that you wait for it to settle in a new direction to readd and sell
again. Rince and repeat until the move is exhausted or until you’re happy.

A common mistake people will do is to be in a hurry to sell. You never sell for no reasons, you sell when the
stock is done, or when you feel that the move is getting exhausted. With all the previous level 2 knowledge
you should be able to read the tape and understand it. Everything also depends on market conditions. Some
days the market is bad, so you’ll want to take less risks and sell earlier. On good days you’ll want to let the
plays run longer, look around and adapt.

All of these technics are part of your Money Management.

Money Management is the tip of the spear. It’s what can kill you or make you a great trader. Any person
with good money management skill will be able to turn a profit on any movement and in any market. As the
name suggests, money management is the way you manage your money (Yeah, duh!).
It comes down to two very important things: How you manage your risk, and how you control your money.
We touched on those notions all throughout the guide but I think it’s important they have their own section.

Let’s start with risk management. Risk is easy, it’s basically how much you stand to lose on a given trade.
Risk is dynamic, you must always KNOW what your risk is, and take it in consideration before making a
decision.
Risk is dependent on:

The Market Conditions: Always look at the market as a whole. If you feel we’re close to a bear period on the
market or a crash, your stocks might suffer from it. Always ask yourself, is the price action in the stocks I’m in
correlated to the market, or to a part of the market. If the answer is yes, you have to be aware of this part of
the market and be ready to act accordingly by planning ahead.

The volatility and liquidity in your stock: Your ability to quickly get in or out of a position is dependent on
the volatility and liquidity in the stock you are buying. An illiquid stock or a very volatile stock present a lot of
risks. I’m not saying don’t invest in them, but always be aware of the risks. If you have a big position in an
illiquid asset, getting out will force you to make the price drop and lose a lot of money. If a stock as a big
spread, not buying in correctly (with a proper bid) will put your average price very high with little options to
sell. If a stock is highly volatile, it’ll go up and down 10+% on a whim making your portfolio take violent
swings.
Your job here is to understand the conditions a stock price is in and adapt your buying and selling strategy
as well as your sizing depending on the risk that are presented by those two factors (Liquidity and volatility).

The company you’re investing in: If you’re buying stocks in a company, you’ll be at a risk if the company
goes bad. It can go bankrupt, aggressively dilute the float, fail the launch of a key product, have a really bad
ER etc. All those events will destroy the stock price and put you at a massive risk. It is your duty, whenever
you are investing in a company to keep yourself informed of the possibility of those events by digging the
fundamentals and fillings of the company. Once you know what to expect size accordingly and plan for what
can happen.
Depending on what you learn, you’ll want to readapt the size of your position near big events. There is a
saying in trading: Buy the Rumor Sell the News: Lowering your average, or outright selling before an ER that
could be bad. Not holding the complete size through data, leaving the ship before it sinks if you feel the
company is going bad etc.
There are plenty of opportunity in the market, but you only have your money. If you lose it all you can’t
invest anymore so don’t be greedy and keep your risk in mind going in those coinflip moments or betting the
house on a bad company.

The type of play you’re doing: Depending on the setup and time frame of your plan, your risk will be
different. On a day trade where you are scalping a 10% movement on a highly volatile 100%+ mover, you
won’t have the same risk as on a 3-month swing in a solid company. This should impact the way you trade
your setups. Always be aware of the inherent risk of the type of play you’re doing and tweak your plan
accordingly: Tight stops on scalps, small sizing on parabolic or crazy moves, trading around a core on swings
etc. Correctly identify what play you are doing, and apply the corresponding best strategy for it as well as
strategies to lower the risk (Like taking profits for example).

The You Risk: It’s not often talked about, but you are also a risk to yourself. Your mental state, your
mindset, your personal bias and preferences, they all create risks. Always be aware of yourself when
entering a play. If you’re feeling bad, depressed, tilted then maybe don’t trade, or trade with a smaller size.
No need to blow your account because you are having a bad day, or week. On the same token, if you really
love a company, have personal feelings and opinions on a stock, maybe it’s best you put those aside and
face the reality of what you’re investing into. Date them don’t marry them, as the saying goes.
Know yourself and weave that into your plan so you don’t become a risk to your own plays.

Understanding and being in control of every type of risk is a crucial part of any strategy and of building a
plan. This will come with experience, you will be blindsided a lot while learning, think of it as paying for a
lesson, but make sure you LEARN from it. Be aware of risk but not paranoid of it. Having a plan to default
back to won’t mean you’ll have to use it. In the case you do at least you won’t panic and run around like a
headless chicken. Your risk will help you control your size and set the proper stops and profit taking zones
thus giving you better control of your money management.

Money Management is what you do with your money. Money is like ammos in a gun: if you have too many,
you’re not doing any shooting, if you have none, you’re defenseless. Your mission is: Saving Private Money
(Always protect your money).

Your first tool is your sizing. We talked about this in the Plan section, and now that you’re more familiar with
risk management, you should understand how to properly size according to the risk you are in and trade
around a core position to lower that risk with profits.
To complement proper sizing, you’ll want to keep a diverse portfolio. Don’t put all your eggs in the same
basket. Don’t be too exposed to a particular section of the market. You’ll want stocks that go up when the
market goes down and stock that go up when the market goes up so that no matter what happens you’re still
profitable or breaking even. If you’re keeping stocks for a long period of time, keep your horizons broad and
diverse.

Your second tool is realistic trading objectives. You should have gain objectives and max losses. Max losses
are the maximum amount of money you allow yourself to lose on a given day, or on a specific play. This will
help you stay in control of your trading. Once the max loss amount is reached, I find it often best to step
away, refresh your mind, and come back either after a couple of hours or the following day. You won’t run
out of days to make money in the market but you can run out of money. Protect your mental state and
your capital with max losses.
Gain objectives on the contrary are here to ensure that you stack those gains. A little math experiment if you
will: There are around 250 trading days in a year. 100$ a day gets you 25K$ a year. 400$ a day is 100k$ and
4000$ a day is 1M$ a year. See how fast those small gains turn into a decent salary?
So set yourself an objective. Once it’s met, you can either walk away, or trade with a limited size. Trust me
on this, there are no worth feeling in trading than meeting your objective for the day only to let your account
turn back red because you got greedy. If you want to keep trading, I suggest making multiple accounts. Once
you’re done with one you jump on to next etc.
Gain objectives coupled with max losses will make sure that you turn into a consistently profitable trader. If
your max loss is 500$ And your gain objectives is 800$ and you reach your max loss 50% (That’s a lot) of the
time you’re still making 37.5K$ a year. These tools will give you control on your trading. I suggest tracking
your daily performance too (some brokers do it for you, or you can setup a simple excel page). When you’re
having doubts, look at the bigger picture, you’ll see that you’re better than you give yourself credit for.

The third and most important tool is stops. A great trader friend of mine once told me that he only became
consistently profitable once he started using stops. They can be hard stops (The stop order from your broker)
or mental stops (Telling yourself when it goes to X price I’ll sell. If you can’t respect mental stops use hard
stops). We touched on this on the previous section (How to sell and place your stop). Stops will protect you
from losing big on unforeseen problems. They will help you keep within your max loss objectives and more
generally stop you from wiping out your account completely. They’ll also ensure you don’t let a green play
turn red (If your stock is going you just have to set a hard stop a couple of cents above your entry and you
can’t lose).
How tight or lose you set your stop depends on you and your strategy, but please use them, respect them
and stay safe.

As you can see all those tools are fairly simple. The strategy you use for risk management and money
management is entirely up to you. I’ve given you the basics, the things you have to consider, simple notions
that you can easily apply to your everyday trading.
Build your own strategy, test it against the market and once you’ve found the one that works consistently
and you know how to adapt it to the market, you’re set on becoming a profitable trader. Every great trader
I’ve ever met has one, so work on building your own as well as building the discipline to follow it ASAP.

Adaptation is the most important trait you should learn

The market is a living beast. It moves in themes, sectors, seasons. Every day is different but every day is the
same. Through this guide, while keeping the notions broad, I’ve given you my take on it, my experience on
how to trade it. But if you want to make it, you’ll have to find your own style. Every trader I work with shares
common basics, but everyone has a style. This is not something you’ll learn overnight. It’ll take years of
refining and tuning and finding what suits you, what patterns you enjoy trading etc.

Once you find something that works for you, ADAPT IT to the market. Adaptation, that’s the key word. It’s
an everyday struggle. You have to adapt your plans, when you buy, when you sell, how you sell, how you
trade. Putin declares war on Ukraine? Market just changed. US government passes a new law on pot?
Market just changed. Federal bank passes new policies? Market just changed. Doesn’t matter if you
predicted the events or not, you are always left to deal with the consequences and adapt to the way the
market changes. It can even be localized to your stocks. Low floats are becoming trendy? Adapt to it and
start trading them. A big twitter financial guru (FURU) started pumping your stock? Adapt to it, learn about
the FURU habits and see if you should sell and get your profits in case of a future dump, or keep riding it with
the newfound volume he brought. Often you will see that the market repeats itself with some slight
difference.

To keep track of all the changes and how to best deal with them you have a couple of options:

First is to check the pulse of the market every day and to keep a track of it. Look at big indexes like S&P 500,
Nasdaq, Dow Jones. Look at other countries too to try and get a global picture. Keep yourself updated on
News: not just economic, but every kind of news that has to do with what you’re trading. This can be
through newspapers, specialized twitter accounts, Podcasts, Tv programs etc. doesn’t matter as long as the
news source is FAST and RELIABLE.
Keep yourself updated on the sector you’re trading. Is the sector hot? Why? If you’re trading banking stocks
for example and Goldman Sachs has fantastic quarterly Earnings report, this could be a great sign and make
other banking stocks go up.
In the morning and the evening look at the top gainers of the day, you can use a screener, your broker etc. If
you see many big percentage movers, maybe the market is hot, enquire on why those stocks are moving and
try to find similar setups.
Everything in the market has a reason. The question you must always ask yourself is WHY? Why is this
moving, why is AMZN having a nice quarter etc. Ask yourself why and dig for answers, the more you learn
the more you’ll be able to adapt.

Second is to keep a record of what you’re trading. Every Week end, I suggest you try and write down a plan
for the coming week. Same thing at the start of each trading day. Then as the day progresses, take notes on
what’s happening, what trades worked why they worked what trades didn’t and why they didn’t. After some
time, you’ll have a sort of trading journal that you can go back to and read. This will help you because
market always comes back to the same basics and what worked some time ago may help you today.
In the same vein, try to keep watchlists that you update regularly. Sort stocks by theme, sectors and peer
plays. Stocks that go together, that are correlated. This will help you a lot to adapt because you can always
just jump back to a watch list and have a direct visual on what’s working.

Third is don’t trade alone. Find a group of likeminded traders you can trust. Find a mentor you can ask
questions to, and try to use his experience to complement your own. Trade all together as a group. Setup a
Discord room, a WhatsApp group or whatever mean of communication you like. Bounce ideas off of each
other, teach each other things and share this long journey that is trading or investing. The trading group will
act as a sort of journal because you can always look things up. Different set of eyes and different opinions
will look for different things and you’ll have a more complete view of the market. This will also help
tremendously with moral and mindset. If you have a bad day share it maybe other people can help or can
confirm that today was indeed a bad day. Help each other and you’ll progress very fast.

Following these simple guidelines will help you a ton in the long run. It’s the simple things you’ll do every
day that will stack up and make you a great trader years down the line. There are no shortcuts, but through
these methods you’ll be ready to face whatever the market throws at you while being calm and maintaining
a good mindset.
Let’s talk about Mindset
The single most important thing that’ll help you improve as a trader, and more generally as a human is
mindset. There is no right mindset, but they are a couple of qualities and traits you have to have to become
a successful trader.

First and foremost, don’t be emotional when it comes to trading. Stocks and money don’t care about your
feelings, so your feelings shouldn’t care about stocks and money (I have a feeling this sentence isn’t English
but I don’t care). Even if you do DD, even if you love the ticker, don’t get emotionally invested in it (the
infamous date them don’t marry them). Stick to your plan no matter what, and don’t let your emotions into
it. Don’t set unrealistic expectations on stocks. All the stocks you are going to trade have possible genius
products in their pipelines, they all have Google/Apple potential, but it doesn’t matter until they release it
and market accepts it.
Same thing applies to profit and losses. As long as the money is in your trading account you have to be
emotionally prepared to lose it all tomorrow. Secure those gains when you can, cut those losses when you
should and most importantly, take money out of the account and PAY YOURSELF every once in a while. The
moment you can sell for a loss without batting an eye, you’re a trader. Selling isn’t the end, you can always
rebuy the stock at a lower average, or even at a higher average depending on momentum. But you can only
take those decisions without second thoughts if you’re not emotionally invested in your money. Disclaimer:
I’m not saying you shouldn’t care; I’m saying you shouldn’t mix stocks and feelings.
Last but not least is not getting caught up in the moment and always keeping your risk in mind. I’ve seen so
many people getting wiped out because they try to make back a loss in one trade taking riskier and risker
positions. You’re having a bad day? You’re tilted and feeling like making stupid decisions? Close your broker
walk away. There is always tomorrow, or next week, or next month. You trade when you’re at your best. If
you want to keep going, keep in mind what you’re willing to lose on a stock, and how much you could lose
on a trade. Stock is up 50% and was 90% lower 2 weeks ago? So, your risk is 50-90% of your money. What is
your reward? What are the guarantees? Are all questions you should ask yourself before you FOMO in. If
you’re willing to take the chance of losing 75% of your money for a 10% gain, casinos offer better odds, I’d
suggest gambling there.

Next is flexibility and adaptability. We just talked about it but it’s worth repeating: You HAVE to be both
flexible and adaptable in all circumstances. This should start at the planning period when approaching a
stock. You have to prepare for every eventuality, every movement that can happen, and then navigate them
like a salmon navigating a river (This is the worst metaphor I could come up with). Don’t get stuck because
you don’t like to short or you don’t like this ticker etc. adapt to what is working at the moment. The method
you’re using won’t always work, market will not always be the same, sectors will keep on moving, stocks
keep on evolving and newcomers keep on appearing. Don’t stick to your guns, keep the basics in mind and
adapt to everything you can so you’re always on top of your game. A good trader is someone that can take
advantage of any opportunity and make money. You think a stock was going up and it’s going down? Find a
way to capitalize on that instead of beating yourself up, go with the flow because you can’t dictate it yet.

Another very important thing is to stay curious. You need to understand what you’re getting into. You are
going to be trading bio stocks, tech stocks, AI stocks, Oilers, Shippers etc. You have to be willing to learn a
bit about each industry. The more you know the more you’ll understand the impact of a news on the stocks,
and the better you’ll be able to do DD. The same applies to trading methods, always try to learn new things.
Be it technical analysis technics, new ways of trading, new products to trade etc. The internet is infinite in its
resources and most of them are free. Go ahead and google all you can, read books, ask other traders that
are good in certain domain what their tips are etc. Never be afraid to learn more, the more you know the
more control you have on your trading and control is everything (Plus it’ll make you seem smart at dinners
when talking about the world)

Don’t be afraid. Playing with money is scary. The unknown is scary. But never be afraid to trade. Your gut is
telling you not to take a trade don’t do it, but if there are no reasons to be afraid, just buy the stock. Rely on
yourself, your knowledge to navigate what’s coming and you’ll be FINE. As my mentor would say: Never be
afraid to make money, you have to try or you’ll never succeed.

Trade on your terms. You can’t see everything, be a part of every move, you’re not omniscient. At the end
of the day, you’ll have to trade what you know. Always trade on your terms. If the setup suits YOU, works for
YOU, if you feel comfortable with it, then go in. If not, just sell and wait for the next opportunity, or pass on
it if you’re not in. No need to be over eager. There will be plenty of opportunities in a year to make a lot of
money. The secret is not to lose the money you have in between these opportunities. Don’t take bored
trades, don’t take forced trades, wait for the right setup to come to you. It doesn’t have to be perfect but it
has to be yours. If the day is looking bad, walk away come back the next day. You can stay and watch, but
control yourself. You are your own boss so be a good one.

Be smart, yes, that simple. Don’t fall for obvious traps, don’t let yourself get caught in scams or people
selling you dreams: if it’s too good to be true, it probably isn’t. There is a great quote I love from the movie
Margin call (Which I recommend you watch if you’re interested in trading): “There are 3 ways to make a
living: be first, be smarter, or cheat”. If you’re not first and not cheating, then you have to be smarter. Stick
to your tools and use your brain.

To finish with, be humble. First in front of loss and gains, when you win big or when you lose on a trade,
always ask yourself why. It’s not luck, it’s not external factors: it’s you! You messed up! And the best thing
you can do now is to understand why so you don’t repeat it.
You also do that on a big win, how did I win? What did I do right this time so I can replicate it? Every trader
wins big, every trader loses, as the saying goes even a broken clock is right twice a day. What will make the
difference is your willingness to accept that you are the root of all your problems and the source of all your
solutions. Humility is also never being afraid of not knowing something but instead be willing to learn.
Bitcoin is moving a lot and you don’t understand a thing? Don’t jump on the ship blind, accept that you don’t
know, get informed and then you’ll be able to act.

And there you have it: Don’t let emotions get the best of you, be smart, plan your moves, educate yourself,
be flexible, adapt to every circumstance, don’t be afraid to jump in, but always on your own terms and be
humble about what comes. You won’t win big by being lazy, it takes hard work and dedication. Understand
that you’re only human, come to terms with your limitations and learn to work around them. The rest will
come with time and repetition.
Final words:
Becoming a profitable full-time trader is a long and arduous route. You’ll first need to understand the world
you’re in, not the trading world, the actual world. Second step is finding your niche, what works for you, and
turning that into consistent profits. You’ll have to work hard and learn constantly. You’ll spend days building
watchlists, searching for bottomed charts, the right set ups, understanding when to buy and sell and how
momentum plays on each stock etc. You’ll have to spend nights and sometimes week-ends digging through
news and filings from a company when doing your due diligence. It’ll be stressful, some days will be bad, and
some days will be good. But what awaits you at the end of this long road, if you manage to reach it without
getting wiped out on the way, is financial freedom and a particular set of skills that you’ll be able to apply in
every part of your life. It’s not for everyone but if you took the time to read this guide, I think you’re willing
to give this a chance. I hope it works for you, good luck and get to work.

A huge thanks to all the traders that made this guide possible be it through their guidance or their help. This
community can be amazing when it wants to, so let’s all thrive to help each other’s and be better.