Sunday, July 23, 2017

Trader Dad: What Makes a Successful Trader? Trading Advice From My Old Man

Since I can remember, I haven't lived with my dad. I barely meet him since he worked overseas for the most part, and never knew much about him. Funnily enough, I never knew he traded financial markets, until after I got into trading and brought it up with him.

Recently, I asked my dad to write a short introduction to trading, something that would be useful for people starting out and dipping their toes into trading financial markets or cryptocurrencies. Even though he doesn't trade Bitcoin or cryptocurrencies (yet), he's had decades of experience navigating the markets, and I hope this short and simple post can give you some insight into what an old-timer has to say about becoming profitable at trading.

So here goes...

Dear Trader,

I have been trading in the “futures market” similar to what we now refer to as the Exchange-Traded Funds (ETF) market for the last 30 years.

I would like to share my experience and knowledge with people that are interested in financial trading (*this is a short introduction and not meant to be a recommendation of any trade that anyone might like to take).

To make it simple, I will sum up the most important elements in making a successful trader. Successful traders are those that make a good and correct decision and/or action in the following:

1. Money

2. Time

3. Target

1. Money

A trader need first to decide the amount that he is prepared to invest or the amount that he is willing to cut loss in each trade and his overall trading.

One must be disciplined with this decision making and necessary control action is very important.

Unnecessary losses usually occur when one overtrades, or holds on to a position that had a big loss for too long that eventually that he cannot afford.

2. Time

Time is a very important factor in many ways:

1. Trader needs to spend time to analyze and decide on a particular trade.

2. Trader needs to decide if short term or long term trading that he/she will like to be working on.

Not spending enough time to understand the market that you are trading can result in unnecessary trading losses.

There are much to learn in trading such as margin requirement, historical high and low level, economic fundamental of the product, average cycle period of high and low, stop order, technical analysis, trading hours, daily swap value of the product, etc.

3. Target

Target refers to both sides of your exit point on either profit taking or cut loss.

A successful trader is more likely to be a person who is very disciplined in his execution of trade.

Trader should always remember that “the market is always there”, which means that one should protect his margin for his future trade.

Having a clear target will eliminate the emotional trading in your trade.

Other Factors

Other than those points in trading that I had mentioned above. I will also like to bring up some other factors and risks concerning futures trading in the modern market as follows:

A. Price Manipulation

Trader should be aware that the globalization of the modern world and the advancement of technology in computers and the Internet had made it very easy for the banking cartel to manipulate the prices throughout all the trading platform from index to currency to commodity such as gold and silver and all other counters.

This situation had been persisting and intensified over the recent years.

The high share index, the low price in gold price and silver are the result of such manipulation.

B. Stop Hunting

Trader will notice that there is always some sort of taking out cut loss movement occur before price is going to make a big move in the opposite direction are clear evident of the price manipulation by the major player in the market. Read more about stop hunting on Investopedia.

C. Economic Data

We used to depend on the economic data issued by various government department to plan our trade.

Trader should be aware that these data are no more as accurate and reliable in the recent time.

D. Major Economic Situation

Trade should be aware of the major economic situation which is going to have a major impact of the world economic in years to come such as:

1. Excessive quantitative easing (QE) (money printing) by various government over the years

2. US national debt of 20 trillion dollars and its debt ceiling

3. The death of petro-dollar

4. The conflict between US with Russia, North Korea and other middle east countries

5. Financial difficulties in the major bank in EU and the possible breakup of EU

6. The purchase of physical gold by central bank


The present market situation is critical and it represent a good opportunity for those that have prepared for the volatile market movement ahead. Do your study, prepare yourself and this will be a once-in-a-lifetime opportunity for many traders. Good luck and enjoy your trading.

Thank you.

Yours Sincerely,
Sam Lee

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