The problem is if trading is your sole source of income, the pressure to constantly get results is always there. If not kept in check this will be a drain on your mental resources and impact your returns.
Why Trading Part Time Can make Sense
One way around this is to trade part-time while holding down your regular job. This removes the immediate pressure to perform. It will let you concentrate on trading without fear hanging over your head.
Plenty of people trade part-time. Does the fact that they are part-time mean that they make less money? Not at all! If being a part-time trader is what you want to do, you can be just as successful as those who trade full time.
All you have to do is follow a few simple rules.
1. Ask Yourself the Right Questions
Before you start trading with real money in the markets, think about the following questions:
- What will be your starting capital?
- What financial risk are you happy with?
- Which markets do you want to trade in?
- What is your personality?
- When do you want to achieve your goal?
- How do you cope with stress?
- How much time can you spend studying the markets?
- Are you patient or are you hoping to get immediate results?
- Why do you want to trade?
2. Your Level of Financial Knowledge
When starting out you should evaluate your current level of financial knowledge. If any of the concepts below are unclear to you, you probably need to invest more in your financial education before you start trading with real money:
- Relationships between asset such as equities, currencies, bonds, and commodities
- Financial contract types such as over the counter (OTC), CFDs, warrants and options
- The meaning of risk, return and money management
- Trading on margin and leverage
- Economic forecasts and news releases
- The impact of macroeconomic and political events on markets
- Broker types: For example ECN, market makers, STP
- Charges such as spreads, commissions, and interest
3. Choose a Trading Style that Suits You
Once you’ve evaluated the above points, you can choose a trading style that suits your profile, your knowledge and your schedule.
With a full time job, two popular trading styles are swing trading and day trading.
Swing trading is used mainly by people who cannot spend too much time in front of the computer during the day. It is about following trends. You analyse the graphs over the weekend or evening and place your orders in advance, according to your analyses. With this method you’ll open fewer positions. You’ll also need to be more patient to see the results.
Day trading focuses primarily on price movements during the trading day. Positions usually aren’t kept open for longer than one day (or the end of your day). Day trading requires a high degree of concentration and commitment to succeed.
Automated trading is becoming more prevalent than ever in financial markets. You’ll need to ask if you want to trade yourself or if you want to use an “off the shelf” trading advisor that will trade automatically for you according to your inputs.
4. Time to Create Your Trading Plan
To make consistent profits, it is not enough to visualize patterns or levels on your charts. You’ll need to have a good trading system that has robust risk management. A trading plan describes the system you will use. It should at least cover:
- Analysis type: Technical analysis, fundamental analysis, sentiment analysis
- Risk: Capital at risk, risk per trade, size of positions as % of capital
- Markets: The markets and product types you will trade
Building your trading plan is not easy. It can be developed over time and should be based on your risk tolerance, your trading style and your financial situation.
You need to test the validity and strength of your trading plan in real market conditions. Only by doing this will know if your strategy is viable and can make consistent profits.
Your plan will evolve as you gain more understanding and experience.
5. Keep a Trading Journal
Experience is only useful if we learn from our mistakes and adapt our approach accordingly. This is why keeping a journal is an essential ingredient to becoming a successful trader.
A journal will allow you to look back at the positions you opened in order to analyse your past performance. It will show you how you’ve handled your emotions, the risks you’ve taken and whether you’ve followed your trading plan or not.
Your trading journal is a crucial source of information for you to adjust your strategy as needed.
It should contain so-called “classical” data, such as:
- Date of entry/exit of the position
- The underlying asset
- Size of the position
- Profit/loss and lessons learnt
In addition to this, it is important that you document details surrounding each trade:
- Reasons why you opened or closed a position in the first place
- Did you manage your emotions during the trade?
- Were the parameters of your trading plan modified while in the position?
- Did it work out the way you expected? If not, why?
Finally: Challenge Yourself and Set Achievable Goals
It is possible to become a successful trader with a busy schedule and a day job. You just need to be patient and disciplined.
It takes time and perseverance to fully understand how markets work. It will also take time to determine the ideal trading plan for your own personality and schedule.
It’s important to challenge yourself yet set realistic goals. However the prize is that one day you may be able to earn a living from your trading.