How To Turn

The Stock Market

Into Your Very Own
Cash Machine

By Simon Ree
 How To Turn The Stock Market Into Your Very Own Cash Machine

Hi, my name is Simon Ree, the Founder of Tao Of Trading.

The nancial markets have been the focus of my attention for the past 30 years. My trading career started in 1992 as a
futures broker. Since then, I’ve worked for some of the most signi cant investment banks globally, including Goldman
Sachs and Citibank in Australia, the USA and Singapore.

I’ve worked with some of the best traders in the world and advised and consulted some of the wealthiest and most
successful families across the Asia-Paci c region.

In 2017 I left the corporate world to focus on my family and my personal trading. I also started sharing my knowledge
with aspiring wealth-builders like you. I have helped thousands of traders and investors make money and increase their
success in the nancial markets throughout my career.

I have written this free guide to introduce how I generate consistent cash ow from the stock market, week to week
and month to month.

HOW AND WHY STOCK PRICES MOVE

Markets rise. Markets fall. Often they just range back and forth in a sideways manner.

To the casual observer, stock price movements can appear random. Some in academic circles even subscribe to a view
called the “random walk theory” that suggests the idea that stock prices follow a random and unpredictable path.

In truth, much of the time, movements in a stock’s price are noisy and without purpose. But now and then, price will
move in such a way that what happens next becomes entirely predictable to those who understand and study price
action.

Markets are very good at discounting information quickly. Traders and investors are motivated to act by the
information available to them. They also act upon changes to their expectations of the future, their hopes, fears,
nancial needs, etc. This means that the stock price movements give us an excellent window into how people are feeling
about the stock.

To those who understand how and why stock prices move, these price movements can exhibit speci c traits that can be
exploited. A trader with a good trading method, strong money management principles and discipline can spot trends and
take advantage of price movements for nancial gain.

Markets are driven by human psychology - don’t expect them to be logical. With the right understanding, trends can
be identi ed, and trading rules applied. Trends can then be exploited for pro t.

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 How To Turn The Stock Market Into Your Very Own Cash Machine

WHAT IS PRICE, ANYWAY?

Price is the point of equilibrium where buyers and sellers are willing to agree to disagree about the future prospects for
a stock.

Buyers of a stock at $50 presumably feel it will be worth more than $50 at some point in the future, while sellers most
likely feel it will be worth less than $50.

In other words, price is determined by how people feel in the moment.

So you can begin to see how changing expectations combined with powerful emotions such as fear, greed or even “fear
of missing out” impact stock prices.

WHAT ABOUT TRENDS?

If you think back to your high school physics classes, you may remember Newton’s First Law of Motion: An object in
motion stays in motion in the same direction until acted upon by an opposing force.

The same is true of stock price trends.

Have you ever looked at a long-term chart of the S&P 500?

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 How To Turn The Stock Market Into Your Very Own Cash Machine

From the chart above, you can see how over the past 50 years, despite some periods of sideways movement and a few
sharp sell-off 's, there is a strong dominant trend from the bottom left of the chart to the top right. This is called an
uptrend and it is characterized by price making higher highs and higher lows.

The chart below of a stock called Teva Pharmaceutical Industries shows the mirror image of this phenomenon – a
downtrend. This is characterized by price making lower highs and lower lows, as it moves from the upper left to the
lower right of the screen.

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 How To Turn The Stock Market Into Your Very Own Cash Machine

WHY DO STOCKS TREND?

Remember how price is the momentary equilibrium where buyers and sellers agree to disagree?

Each bar on a price chart depicts the range of prices a stock has traded at during a trading day (in the case of a daily
timeframe chart). They also show the battle between buyers (bulls) and sellers (bears).

When bulls feel strongly bullish, they buy more eagerly and push the price up. This behaviour is driven by emotions
like:

Con dence – price has risen; I was right! Gosh, I’m really good at this; I should buy some more!

FOMO (Fear Of Missing Out) – Stock XYZ is already up 10% this month, and my next-door neighbour bought some. I
better buy now before it rises further!

Greed – If I buy 1,000 more of stock ABC and it rises another 20%, I’ll be able to afford that new car!

When bears feel strongly bearish, they sell more eagerly and drive prices down. Emotional drivers typically include:

Lack of Con dence - Oops, the stock didn’t rise as I expected; I’m cutting my position now in case it falls further.

Fear - Holy smoke! This stock has fallen 25%! How am I going to explain this to my wife? I better get out now while I still
can!

Forced Selling – “Hello Mr Smith, this is Johnny from XYZ Brokerage. We need you to wire $25,000 into your account
by the close of business today, or we will be forced to sell every stock in your portfolio.

Trends thus have their foundation in strong feelings. When the trend is up, people feel con dent and optimistic and do
not mind paying a little extra for a stock because they want to get involved in what looks like a winner.

When the trend is heading lower, con dence can evaporate quickly. When that happens, people do not quibble about
selling at lower prices! They don't want to own something that is losing them money (or making them look stupid).

Waves of greed and fear sweep up market players over and over again.

Because human feelings are the driver of price, trends can be remarkably persistent. This is because we humans are
psychologically hardwired to expect that the recent past will continue into the future.

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 How To Turn The Stock Market Into Your Very Own Cash Machine

Imagine a ball game where Team A is in the lead and has all the momentum. Fans, commentators, and experts will all start
talking about how Team A “looks unstoppable”, or how "Team A has all the momentum", or how they “have the game in
the bag”.

The same phenomenon can be seen in a job search. If you are interviewing candidates for a job, chances are you will
want to see their CV and some references. Why? Because you want to see what they have done in the past, with the
expectation that it will carry on into the future. From boxing matches to the law courts, this expectation that history will
continue into the future plays out in many aspects of our lives. And the markets are no different.

Because of this very human expectation, the crowd will tend back a discernable trend whenever it has the chance.

HOW DO WE PROFIT FROM TRENDS?

Trading with the trend is like sailing with the wind at your back. It’s like paddling a canoe downstream. Trend trading is
following the path of least resistance.

It’s important to note that only a few stocks are tradeable at any point in time, and most are not. Some stocks will be too
illiquid. Others may simply not be trending. Some may be trading in a very choppy, trendless pattern, while others may
be unexpectedly volatile. Therefore, it is essential to have a trading method that scans for and identi es only the highest
probability candidates for trading.

At Tao Of Trading, we use a range of trading setups that hone in on high probability trading candidates. These setups
can be easily identi ed and reliably traded for pro t. All of them involve the identi cation of a dominant trend.

One of my favourite plays is what I named the Bounce 2.0 setup. This setup relies on taking advantage of retracements
within the dominant trend.

RETRACEMENTS
Retracements are periods of short-term weakness within an uptrend or periods of short-term strength within a
downtrend.

For buy trades, we are looking to buy into weakness when the trend is up. Buying retracements looks something like
this:

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 How To Turn The Stock Market Into Your Very Own Cash Machine

You can see in the drawing above that the share price (the wiggly black line) is trending up as it is moving from the lower
left to the upper right of the chart. Price is exhibiting higher highs and higher lows.

What we are doing with Bounce 2.0 trades is buying the dip in an uptrend with the expectation that price will “bounce”
back up. This is why I named them “Bounce” trades!

Imagine throwing a tennis ball on the oor. In this analogy, we are trying to jump on the tennis ball as soon as possible
after it has hit the ground with the expectation that it will continue to bounce up.

Bounce trades also work in stocks that are trending lower in price. Bounce 2.0 trades in a falling market will look
something like this:

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 How To Turn The Stock Market Into Your Very Own Cash Machine

Here’s how a bullish Bounce Trade looks on a real-life chart. I’m using a share price chart of Mastercard in this example:

Let’s take a moment to recap what we are doing here:

1. We are identifying the dominant trend

2. We are exploiting identi able price patterns (retracements) within the trend for high probability, pro table
trading opportunities

3. We use custom signals to inform us when the retracement is over, and price is likely to resume its prior trend

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 How To Turn The Stock Market Into Your Very Own Cash Machine

NOW HERE’S WHERE THINGS GET INTERESTING…

When I see a stock that is likely to move strongly up or down, I don’t buy or sell the stock.

I buy options on the stock instead.

What are options? Only the most powerful nancial tool available to traders and investors today!

There are two kinds of options. Call options and put options.

We buy call options (calls) when we expect the stock price is going to go up (think “call up”, as in "call up a friend").

We buy put options (puts) when we expect the stock price is going to go down (think “put down”, as in "put down your
bag").

Buying a call is like "renting" a stock instead of buying it. When you rent a house, you get the bene ts of possessing the
house for a xed period of time without having to incur the signi cant upfront cost of owning the house.

With a call option, you get the bene t of "renting" the stock (as opposed to the house) of your choice for a set period
of time without the signi cant cost associated with the house purchase. But the beauty of options is that when the
underlying stock price goes up, we make money!

That’s right, with a call option, we don’t make money from buying shares. We make money from renting them!

If call options are like a rental agreement on a stock, put options are like an insurance policy.

Why do we buy insurance? To protect ourselves in case something bad happens.

The “something bad” in this case is falling stock prices.

You see, puts gain in value as stocks fall in price. So by buying puts, we can quickly pro t from falling (or crashing!) stock
prices!

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 How To Turn The Stock Market Into Your Very Own Cash Machine

OPTIONS HAVE 5 KEY FEATURES THAT MAKE THEM VERY ATTRACTIVE TO TRADE

1. Options offer us the best way to leverage a small amount of money into potentially signi cant returns
Leverage means signi cant returns on a small capital outlay. When we buy an option, we only pay a small fraction of
what the underlying stock would cost us. Yet when the stock moves in our favour, we can stand to make almost as much
pro t as if we owned the underlying shares.

2. Options enable us to be pro table in any kind of market condition

We can buy calls when we expect stock prices to rise and puts when we expect stock prices to fall. There are even slightly
more complex strategies that enable us to be pro table in a at or trendless market. Options are incredibly exible!

3. Options offer unlimited upside together with limited downside, making risk management straightforward
The most you can lose on an options trade is the amount you pay for the option. This is typically only a fraction of what
buying the underlying shares would cost you. Limited downside with unlimited upside is a key feature of options
trading.

4. Options can provide consistent opportunities for high probability trading

With just two or three trading methods, we can nd high probability setups in the stock market almost every day.

5. Options are exible and can be highly pro table in a stock market crash situation, when stocks, ETFs and mutual

funds are all losing value rapidly

Put options can literally explode higher in value when the stock market sells-off sharply! February and March of 2020 -
the so-called "Covid Crash" were my two most pro table trading months ever. I netted a 24% gain in February and a
31% gain in March.

PUTTING IT ALL TOGETHER

A brief summary of my trading process is as follows:

Identify the dominant trend of the stock market

Scan for stocks that are in sympathy with the trend of the market AND that are forming a Bounce 2.0 setup
Select the appropriate option to buy
Place the order and risk manage the trade
Remain disciplined and recognize my emotional state

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 How To Turn The Stock Market Into Your Very Own Cash Machine

Returns of 50% to 100% or more per trade are common on our options trades. And the duration of our trades
tends to be relatively short, anywhere from two days to four weeks. By following a disciplined process and
managing our risk, we have managed to turn the stock market into a machine that produces regular, consistent
cash ow.

The best thing is, you can learn how to do this too!

IN CONCLUSION

In this guide, I have explained:

What moves price

How and why trends form
Why trend following is such a powerful trading method
How you can use options to exploit patterns that form within trends for pro t
How you can use options to pro t from both rises and falls in the stock market
The ve key features of options for serious traders
How you can generate consistent cash ow from the stock market

I trust you have found this guide helpful.

If learning how to trade options professionally interests you, I invite you to take a look at my online training course,
Options Academy.

Inside Options Academy, I begin with the fundamentals of what options are and how they are valued. I then take you
through trend following techniques, and the exact setups I use to generate cash ow from the market week after week.
You will also learn how to gain mastery over your emotions, banish fear, and obtain a winning trader's mindset.

Options Academy is perfect for ABSOLUTE BEGINNERS looking to learn how to trade as well as experienced traders
looking for increased consistency and additional edge.

Options Academy is the best course of its kind that you will nd anywhere. You will not nd the combination of a
curriculum of this depth and breadth, a teacher with my real-world experience, and a course with such attractive pricing
anywhere else on the internet.

Check out THIS PAGE for more information and if you’re serious about trading options successfully, I can’t wait to see
you on the inside!

Simon Ree
Founder, Tao Of Trading - We win. A lot.

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 Disclaimer

Important! By reading this ebook you explicitly agree to all of the following.

DISCLOSURE: The author of this book, together with Tao Of Trading Ltd, its managers, employees, and af liates (collectively “The Company”)
do not make any guarantee or warranty about what returns the reader can expect from their investment and trading results.
The Company is not af liated with, nor does it receive compensation from, any speci c security.

The Company is not registered or licensed by any governing body in any jurisdiction to give investing or trading advice or provide investment
or trading recommendations.

ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment or trade. This book
and associated online and electronic material should not be used as a basis for making any investment or trade.

Indemni cation/Release of Liability.

By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing The Company, its af liates, and
successors from any and all liability, damages, and injury from the information contained in this book and associated online and electronic
material.

You further warrant that you are solely responsible for any nancial outcome that may come from your investment and trading decisions.
Forward-Looking Statement. As de ned in the United States Securities Act of 1933 Section 27(a), as amended in the Securities Exchange Act
of 1934 Section 21(e), statements in this communication which are not purely historical are forward-looking statements and include
statements regarding beliefs, plans, intent, predictions, or other statements of future tense. Past Performance is Not Indicative of Future
Results.

Investing and trading are inherently risky. While a potential for rewards exists, by investing or trading, you are putting yourself at risk. You
must be aware of the risks and be willing to accept them in order to invest in any type of security. Don’t trade with money you can’t afford to
lose. This is neither a solicitation nor an offer to Buy/Sell securities. No representation is being made that any account will or is likely to
achieve pro ts or losses similar to those discussed in this book and in associated online and electronic material.
The past performance of any trading system or methodology is not necessarily indicative of future results.

All trades, patterns, charts, systems, etc., discussed in this ebook and associated online and electronic material are for illustrative purposes
only and not to be construed as speci c advisory recommendations.

All ideas, opinions, and material presented are entirely those of the author.

No system or methodology has ever been developed that can guarantee pro ts or ensure freedom from losses. No representation or
implication is being made that using the methodology or system will generate pro ts or ensure freedom from losses.

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