Trading techniques for part-time traders
Part-time forex traders can feel left out as they do not have the time to dedicate enough trading hours during the day.
Although forex trading is sought-after as a cost effective way to trade/speculate, not many traders can afford to trade full-time.
One of the biggest issues with part-time traders in forex is the fact that the currency markets are dynamic. With the markets being so fluid, there is always a fear of missing out or FOMO as it is commonly known.
The fear of missing out builds upon the psychological concept of day traders. Traders often feel that they may miss a large market movement. Most often, this manifests as lost trading opportunities.
The FOMO aspect as a result can make part-time traders being left out.
One may start to believe that trading forex part-time may lead to lower profit levels. This is further accentuated by the geographical aspect.
A part-time day trader located in Europe may be able to trade before or after the day's business hours. This leaves them open to trading during the late Asian session or during the late US session.
On the other hand, a part-time day trader from Tokyo, can access the markets pre-session opening.
This would provide fewer trading opportunities. This is because it is only the late US session or the early Asian activity taking place.
On top of this, many trading strategies one gets to see, is usually suited for traders who can spare "more than a few hours" during the day.
Consequently, due to the limitations, there are not many trading strategies that part-time traders could find. And even if they do, there comes a question about swing trading.
Finding the markets that you want to trade
The first step toward a successful part-time forex trading strategy begins with the markets.
Firstly, part-time forex traders do not have the luxury of picking currency pairs of their choice.
Of the many reasons, liquidity in the forex currency pairs matters. Therefore, cross currencies and exotic currencies are out of question. Lower liquidity leads to wider spreads.
This can be detrimental for part-time forex traders. Hence, depending on your geographical location, it is advisable to stick to the major currency pairs.
These include currency pairs such as EURUSD, USDJPY, GBPUSD.
We only list out three instead of seven for the currency pairs. This is because other major currencies such as USDCAD, USDCHF, AUDUSD, NZDUSD also drop in liquidity.
It can lead to wider spreads that may not be suitable for trading.
The three major currency pairs we mention are one of the most traded currency pairs. As a result, the ample liquidity takes care of having the spreads in moderation.
Besides the liquidity factor, part-time forex traders should also be able to understand the instruments they trade.
For those who wish to trade other instruments beyond forex (such as commodity CFDs or index CFDs) you should be more attentive.
As part-time forex traders, it is possible that you will be spending few hours a day. Hence, it is important to learn about the characteristics and behavior of the instruments you are trading.
Unique characteristics of part-time forex trading
With part-time forex trading (which is spending just an hour or two a day), the approach requires to be unique as well.
But that does not mean that the trading strategies are limited.
Here are some ways traders can overcome the shortcomings of not being able to spend time in front of their trading terminal.
Using automated trading strategies
Automated trading strategies are ideal for part-time traders. This can help you especially if you have developed your own system.
An automated trading system, when back tested can help you to reap steady profits. Of course, there is no guarantee that automated trading strategies will make you steady returns.
Therefore, to be able to use automated trading systems, part-time forex traders should spend a considerable amount of time testing the markets.
Implementing an automated trading solution will require time and patience.
Most importantly, back testing and forward testing will play an important role to assess its effectiveness.
Many traders often make the mistake of purchasing an automated forex trading strategy off-the-shelf.
Quite often, traders fall prey to the returns that are usually advertised. While there is nothing wrong in purchasing an off-the-shelf or a blackbox trading strategy, it needs to be assessed first.
This means applying both backtesting and forward testing methods on the instrument that you are interested to trade in.
Hurrying this process and implementing a blackbox forex trading system could lead to adverse market returns.
You may get lucky and make profits, or things may go downhill leading you to lose your investment.
Trend following systems
Trend following systems in the forex markets is beneficial for part-time traders. However, part-time traders will be able to trade based off the daily charts.
Due to the timeframe involved, the daily charts are more suitable for timing of trades for part-time traders.
There are many different trend following systems. These include the regular moving average crossover methods, to Donchian channels and many more.
At the end, it is up to the trader to understand and be familiar with the trading system that they wish to use.
But remember that it is not just picking a trend following system but also risk management that plays a role. This is even more important for part-time forex traders.
Since you are not available to monitor your trades all the time, it is important to make use of stop loss levels.
This will ensure that your investment is protected against any adverse market movements.
Price action plays an important role in part-time forex trading
When you trade forex part-time, the price action for the instrument you are monitoring is important.
While day-traders can get away by using a trading system that involves technical indicators, this is not the case for part-time traders.
Although one can use indicators and build a trading strategy, part-time forex traders need to pay attention to the charts. Especially, one would need to look at the daily and the weekly charts to gain some context.
While short term charts are useful for timing the entry of your trades, you cannot monitor the short term timeframes all the time.
While one could make use of MT4 mobile trading apps, it still requires a lot of focus. You can tend to get impulsive, and this may lead to premature trade entry or closure.
As a result, following the trends on the daily and weekly charts, and learning about price action will go a long way.
Preparing a trading plan
Part-time forex traders should strictly follow a trading plan.
A trading plan can be derived by following a weekly research routine. The forex markets are closed on the weekend. Therefore, there are not much of distractions for part-time traders.
Looking at the charts on a weekly basis one can pick potential trading opportunities for the week.
The downside being that you may not be able to place any pending orders during the weekend.
Therefore, using MT4 scripts or EAs for order management can be very beneficial. Using such scripts, part time traders can place pending orders over the weekend.
These orders are then placed once the market opens, automatically. You may want to invest in a VPN as well to ensure that your MT4 trading platform is running round the clock.
As mentioned earlier, part-time forex traders can also look to the smaller chart time frames to time the entry for their trades.
One should also look at the weekly forex economic calendar. This will help you to understand the main market events scheduled for the week ahead.
It will also alert you to any potential market movements that may occur as a result of the schedule.
Using pending orders with stop loss and take profit levels
Needless to say, one of the biggest challenges for part-time forex traders is in managing risk.
At the outset, protecting your trades against market movements is essential. Day traders can get away with this especially if they are monitoring the markets round the clock. But part-time forex traders do not have this luxury.
Secondly, unlike day traders, part-time traders are also not able to place a trade at market price.
Therefore, it is essential that you should make use of pending limit or stop orders along with the stop loss and take profit levels.
The moment one tends to detract from this very basic trading concept, you may start to see the losses piling up.
And also, regardless of using pending orders, always risk only a small percentage of your investment capital.
Using larger lot sizes may have a higher profit potential. However, the risk is also much greater.
Make use of technology
Needless to say, there are a lot of trading tools and apps available today.
For example, the MT4 or MT5 mobile trading app allows you to trade or monitor your trades on the go.
Likewise, there are online trading journals that you can link your account to. Not to forget, the numerous tools for fundamental analysis such as news apps and so on.
But one should find a balance.
Being overwhelmed with market news and information can cause one to take impulsive trading decisions.
And since you do not have the luxury to monitor your trades, it can turn out to be adverse.
Therefore, part-time forex traders should find a balance when using technology to further their trading goals.
There are both advantages and disadvantages when it comes to utilizing trading technologies. And the way one uses it can determine their success in forex trading.
Benefits of trading forex part-time
If one thinks that they are at a disadvantage when trading forex part-time, you are wrong.
In fact, part-time forex trading will force you to be disciplined.
Due to the time constraints and other obligations during work hours, a trading plan is essential.
As a part-time trader, to be successful in trading, you will need to have a long term plan. Furthermore, unless you plan your trading week ahead of time, you won't go much far.
Hence, maintaining a trading journal can be very helpful for part-time traders. Forex trading part-time is a mix of speculation and also short term investing. This borderlines on swing trading.
So, traders need to develop a certain risk appetite. This can inculcate some very good trading behavior that many traders lack.
Keeping track of your analysis on a week to week basis can help you to build a strong ethics when trading.
It also helps you to stay away from any impulsive behaviors one gets to see among day traders.
Are there any good trading strategies for part-time forex traders?
We finally come to the big question that comes to everyone's mind.
Are there any off-the-shelf forex trading systems for part-time trading?
Contrary to what you may read on the Internet, the fact is that this question is very subjective.
The term part-time can mean different things for different traders.
Some traders are able to spend a few hours a day, but others are able to spend only few hours a week.
Therefore, you should not fall prey to a trading system that is marketed as being ideal for part-time forex traders.
At the end, even with part-time trading, forex traders need to spend a lot of time in researching and testing their strategies.
There is no better part-time forex trading system than the one that you build.
Such a trading system is more suitable and convenient for you. This will ensure more familiarity with the trading strategy that you developed.
However, if you happen to come across a forex trading strategy that is ideal for part-time trading, you should first test it on a demo trading account.
Only when you gain enough familiarity with the trading system, should you migrate to using it on a real trading account.
At the end, whether you are trading forex full-time or part-time, there are some basic characteristics common to both.
Part-time forex trading may
seem limiting for some, but if you have the right mindset and approach, you can
easily make money with part-time trading as well.
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