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A Beginner’s guide to part-time day trading: Trading is a good way to build your wealth. Technological developments and a rise in financial awareness have increased the popularity of trading as a career among young people. Many people want to go into full-time trading. However, the uncertainties and risks are too high for people who already don’t have much experience in the field. So, it is always better to try your luck and skills in part-time trading before becoming a full-time day trader.
Why Should You Do Part-Time Day Trading?
People who do trading do part-time day trading instead of full-time trading because of the following reasons.
Everyone interested in trading doesn’t come from a business background. So, they don’t have the necessary experience or knowledge to excel in full-time trading and hence cannot take that risk.
Capital Vs Daily Expenses
Nor do many people have much wealth accumulated to meet their daily expenses as well as to spend on trading platforms. Frequent withdrawal from trading accounts to meet daily needs is not advised in trading as this reduces the compounding effect and reduces the growth of wealth significantly. Keeping your job will help you meet your expenses and even add to the trading account and hence the growth of wealth is faster.
Risk Factors and Losing Streak
So, many can’t take the risk of leaving their work to be a full-time trader because too many risks are involved. Trading is a very volatile platform. The fates can reverse in the blink of an eye. So, keeping your job will give you the mental freedom to trade without much pressure as it is not your sole income. This will also ensure that you will not be turned into a pauper when there is a prolonged losing streak in your trading.
Passion for Profession
Some people do like their profession and want to stay in it. They can do part-time day trading to achieve a supplementary income.
Some people have no experience in trading. So, they have to try doing part-time day trading first to learn the ropes of the trade. If they are successful in part-time day trading, then they can think of becoming full-time traders. We have to remember that casual day trading is a good learning method but not a good earning method.
A Beginner’s Guide to Part-Time Day Trading
In ‘A Beginner’s Guide to Part-Time Day Trading, we intend to give the basics of parttime day trading. One of them is the assets that you can trade when you trade part-time. There are many things that you can trade when you are a part-time day trader. A few of them are mentioned below.
Part-Time Day Trading of Stocks and Futures
Day traders need to trade only for a few hours during a day in stock and futures markets. Some traders do trade the whole day. But the best trades happen during two crucial times. One is just after the trade markets open. And the other is just before it closes. When at your starting stage in trading life, focus majorly on the time when the market opens. Be prepared and sit in front of your screen. The first thirty minutes is the most volatile period. This is the period that has the best profit potential. If you are short on time, you can finish the trading within one hour. If you have more time, you can sit for one more hour. The time taken to complete a trade starts increasing as the volatility of the market reduces.
If trading during the closing of the market is what’s convenient for your work timings, then do it in the one-hour time window before the closing of the market. The times of best profit potential are almost the same for stocks as well as futures. Most trading actions occur during these times.
Part-Time Day Trading in Forex
If you are unable to trade during the peak stock market hours, then you should try the foreign exchange (forex) market. This market works 24 hours a week and hence is suitable for people who have only one to three hours free to trade at irregular times during the day. In the forex trading market, the trade is done in currency pairs. The us dollar to euro is the popular currency pair. You should know that the peak hours of trading here depend on the currency pairs you choose. And in each part of the day dynamic of the market is very different. You have to find the time window that you prefer to trade in.
Part-Time Day Trading Vs Casual Day Trading
One of the problems that you may have with part-time day trading is something that happens from the error in the way in which a person perceives this method. They confuse part-time day trading with casual trading. When you are a part-time day trader that means you trade for a certain time at particular hours everyday and then use the rest of the day to do something else. But the casual traders trade when they feel like it or when they have some extra time. Seasoned traders advice against it because here trading lacks any planning or structure. The market fluctuates all the time and trading at random times will not be very rewarding and doesn’t lead the path of success in trading.
The part-time traders trade regularly while the casual traders are active for a few days and then take a few days off, these periods of inactivity will make you slow and less sharp and hence you will be susceptible to more mistakes. Never fall into the trap that is casual trading. It will only lead you to losses. If you are doing part-time day trading, then it is better if you are serious and treat it like a part-time job or even a business. Otherwise, don’t do it at all.
How to Become a Part-time Day Trader?
Follow the steps given below to step into the world of part-time day trading.
- Select a trading schedule that works for you.
- Select the market (or currency pairs) that brings more profits for you and is suitable for your trading schedule.
- Set practical and realistic goals.
- Start your trading account in a brokerage with a good reputation.
- Learn several trading strategies and theories and select the one that works best for you.
- Always have proper risk management strategies while trading.
- Review and analyse the trades you completed at the weekend when you are not trading
Tips to Succeed in Parttime Day Trading
The tips given below will help you achieve more gains while doing part-time day trading.
- Pick the market and trade most suitable for you
- Only do the trading strategy you mastered. Stick to it as much as possible.
- Never trade when you are at your day job
- Check whether the rates of forex are affecting your trading
- Consider taking up swing trading
- Don’t trade the entire session
- Consider doing automated trading
- View the risk management as if you are a fulltime trader
- Look for quality rather than quantity. Maximising the gains is the goal, not maximising the number of trades you do
- Never take the risk of spending too much money on a single trade
- Always keep learning and improving your skills
A Beginner’s Guide to Part-time Day Trading : FAQs
- Is casual trading a good option?
Never. Causal trading is inconsistent and unstructured. It will always result in bad decisions and losses.
- What can be traded when you are a part-time day trader?
Anything like stocks, futures and foreign currency can be traded when you are a part-time trader.