If you have a regular 9 to 5 job and want to trade the Forex market in your spare time, then turning to part-time trading is likely the only solution you have. Fortunately, by managing your time efficiently and following the steps outlined below, trading the Forex market part-time might not be as hard as you think.
The first question you may want to ask is, can you actually trade Forex part time? The short answer is, yes you can!
Now you know this, the second question to ask is how to get started trading forex?
Let’s find out …
Step 1: Analyze the Market the Evening Before
When trading the Forex market part-time, time management plays an important role. By analyzing the market for potential trade setups and reading relevant market news the evening before, you’ll stay up-to-date on major developments and be able to identify trading opportunities before they arise. Hit a Forex news portal and scan through a few currency pairs which might get affected by the news, mark important technical levels and spot at what price you would trigger a trade.
For example, if New Zealand is reporting on labour market conditions, scan through the New Zealand dollar vs US dollar pair and a few cross-pairs, such as NZD/JPY, NZD/CAD and AUD/NZD and mark which support and resistance levels might get broken on the release. Jot your findings down, and you’re ready to place the trades the following morning.
Step 2: Employ a Strategy That Isn’t Actively Managed
Before you rush into placing the trades, you need to make sure that your trading strategy is suitable for part-time trading. Since this article considers part-time trading as an activity which is done beside your regular 9-5 job, you won’t be able to manage your trades actively during this period of time. This means that you’ll need to use a trading strategy which isn’t actively managed but has a “set and forget” approach.
Naturally, a scalping strategy would be inappropriate for part-time trading since you would need to stay in front of your screen and actively manage your trades. Even if you intend to scalp the market after 5 p.m., chances are that volatility will vanish as both the New York and London session will be closed (assuming you live in the United States).
This leaves us with day trading and swing trading strategies to choose from. Both will work fine for part-time Forex trading, so pick the one that best suits your psychological traits and trading goals.
Step 3: Place Your Trades in the Morning
Finally, the time has come to open your trades. First, recheck the trade setups that you’ve marked the evening before and confirm that they’re still valid. If a breakout has triggered a trade setup overnight, you can open a market order immediately in the morning and place your stop-loss and take-profit targets for the day (if you’re day trading) or for the following days (if you’re swing trading).
If some trade setups are still not confirmed, i.e. the breakout has still not happened, or the price is at an important support or resistance level, you can place a pending order which will automatically trigger a market order once the price reaches your pre-specified level. Pending orders are a great tool for part-time Forex trading, as you don’t have to be in front of your trading platform to open the trade.
It's totally fine to open multiple positions even if some of your older positions are still open. Just make sure to employ strict risk management rules, pay attention to the amount of your free margin (you don’t want that to drop to zero, you’ll face a margin call) and use stop-loss orders on all of your trades. Furthermore, if you’re based in the United States or Europe, the New York and London morning sessions provide enough liquidity to keep trading costs low.
Step 4: Keep a Trading Journal and Make Regular Retrospectives
You’re done with your day job and can’t wait to come home and check your positions. In an ideal world, all of your trades would have hit take-profit, and you would be thinking about quitting your day job to focus on full-time trading.
However, we don’t live in an ideal world and chances are that some of your trades were losers. That’s where the importance of keeping a trading journal comes into play. A trading journal is simply a list of all the trades that you take, with entry and exit levels, trade description, and the reasons why you took a trade. Keeping a trading journal can significantly quicken your learning curve, especially if you do regular retrospectives of your previous trades and identify why certain trades hit your stop-loss level. Try to find a pattern of common mistakes that you make when a trade turns against you, and try to avoid them in the future.
If you decide to trade the Forex market part-time, you need to organize your spare time efficiently and employ a trading strategy which doesn’t require active trade management. Start with analyzing the market the evening before by reading news and scanning through currency pairs which might be affected by the news. Look for potential trade setups and important support and resistance levels.
Next, make sure to use a trading strategy which doesn’t require to sticking in front of the screen all day long. A strategy based on day-trading or swing-trading will usually do.
In the third step, you need to execute the trades early in the morning before the beginning of your day job. If a trade setup isn’t confirmed yet, simply use pending orders to catch the trade.
Finally, keep a trading journal of all your trades, with journal entries covering the entry and exit prices, profits, losses, and reasons why you took a particular trade. By making regular retrospectives of your trading journal, you should be able to identify repetitive patterns in your losing trades.
Phillip Konchar is the Head Tutor at the My Trading Skills – online financial course provider. Over the past 10 years he has provided external consultancy services such as online and live trading education and market analysis to a range of financial institutions.