People do not always choose day trading as a full-time occupation. Sometimes they have other duties in their days. Or maybe they just want to check whether day trading is something for them and they are willing to give it more time in the future. No matter the reason, a full-time day trading will slightly differ from part-time day trading.
In this article, I will present 7 extremely useful tips for those who chose part-time day trading for the time being.
1. Choose the right time
All markets have specific times in which they are most volatile. As a part-time trader, you should focus on these hours. Usually, they will be the first and the last two hours of the trading session.
When you choose the most volatile period of the day, you will spend less time in front of the computer and at the same time, you will not miss many opportunities to enter the trading positions.
2. Choose the right market
Different markets remain open during different timeframes. You should choose the one which stays active when you have sufficient time to trade.
If, for example, you are living in Asia and you wish to spend time trading after your work, you can choose the USA markets. The first two hours when they are open will be the hours before Asian go to sleep. Or if you are trading from the USA, you can try Hong Kong’s HSI.
3. Consider the foreign exchange rates
It is often the case, as mentioned in the previous point, that you will choose the overseas market. It is simply because they remain open when you finish your regular work and are able to spend some hours on trading.
Therefore you should follow the foreign exchange rates. You will most probably need to deposit money in a currency that is different from your own. The foreign exchange rates fluctuate and it can influence your returns.
4. Establish your risk management strategy
It is true that you are trading just part-time. You should not, however, ignore the risk involved in day trading. You ought to take an example from full-time traders and establish a good risk management strategy. It should include cash management, position sizing and operational risk.
You should think about your capital as if you were trading full-time. There is always risk involved and you should not diminish it. Cash management is thinking over the way you want to administrate the money in your trading account. How much of your profit you will withdraw and how much will remain to increase your trading capital.
Position sizing is deciding on the amount of money you are ready to put in a trade. Many different models of position sizing exist and you should learn about them and consider what is best in your financial situation.
Think about the ways you can reduce the operational risk. You should always use a good and reliable internet connection, regularly backup your trading terminal if there is such an option. Put the number of your broker on speed dial. Maybe you can also think about an extra power source.
5. Make use of the time during weekends
As a part-time trader, you do not have so much time during weekdays. Therefore, you should use the time during weekends wisely.
Reviewing your past trades is extremely important. By monitoring constantly your progress you will get to know your strong and weak points. You will be able to find out what works well in your strategy and what does not. You may not have enough time to do this during weekdays, and that is why you should focus on this task on weekends.
Follow your trading plan and open trading transactions during weekdays. Focus on evaluating your performance during weekends.
6. Leave day trading while at work
You may feel a temptation to try day trading while you are at work. Maybe you have some spare time or a faster internet connection than at home. Resist the urge to open a trading position when not all your focus is on it.
Trading always involves risk and you need to have sufficient time to analyse the market, open a transaction and wait how the situation evolves. You cannot allow yourself to be interrupted in the middle of your trading session. And this is why do not succumb to the temptation of trading while at work.
7. Automated day trading as an option
Automated trading is allowing that your trades are conducted automatically. It is a perfect solution for part-time traders as they have a limited amount of time they can devote to day trading. They have to go to a regular job. With automated day trading, you will have a chance to profit during this time as well.
Nevertheless, this option is not for everyone. You should have some fundamental knowledge of programming. You should understand the risk involved in automated day trading as well.
If you are interested in this topic and have the skills necessary to code a trading system I recommend to read Trading Systems and Method by Perry Kaufman.
Enjoy day trading!