You may have a strong interest in day-trading but not have the time or resources to pursue it as a full-time career. Many professional day-traders only spend a few hours a day trading before doing other activities. It can be very lucrative even without a full-time investment.
What Is a Day-Trader?
A day-trader buys and sells securities (stocks, futures, ETF's, mutual funds, etc.). They can do this multiple times during the day, but they never carry open positions over to the next day. Day traders differ from active traders, who might hold a position for several days, or from long-term investors. To be successful, you need knowledge, skills, and certain psychological traits.
Conduct a Self-Assessment
Successful day trading will require mathematical analysis, financial knowledge, and a strong stomach. The right mindset is essential. If you aren't prepared to learn the markets and take risks, you won't get past square one. You could try reading books like Trade Your Way to Financial Freedom by Van K. Tharp and The Psychology of Trading by Brett N. Steenbarger. Even if you only commit to trading a few hours a week, you still need the right mindset.
Make Sure You Have Sufficient Capital
Nobody can generate profits consistently. When considering investing for beginners, there may be long periods where you don't make profits. If you are trading part-time and have other sources of income, this will considerably decrease your risk of financial ruin. You want to enter the trading world with a good amount of capital. To be an active day-trader, it is recommended to have a balance of $25,000 that you always maintain.
Understand the Markets
You need a solid ground of knowledge about how the markets work. This can range from trading hours and holidays to the impact of news events and margin requirements. You need a broad knowledge base that will stand you in good stead.
Set Up a Trading Strategy
Different securities all trade differently. Without understanding their characteristics and trading requirements, you cannot come up with a good trading strategy. When starting out, you can look at some well-established trading strategies. As you grow in confidence and experience, you can move on to more complex strategies.
The trading world is very dynamic. You may make enormous profits for a time and then have a long fallow period. Be open to adapting your strategies if they start to fail.
Day-Trading Stocks and Futures
Some day traders trade all day, but actually, the greatest returns in the stock market are only available for a few hours a day. The official opening times of stock trading are between 9:30 am and 4 pm EST. If you want to trade part-time, focus on the opening hours. The first 30 minutes is the most volatile time of day and provides the opportunity for the highest profits.
After the lunch hour, there are much fewer opportunities. If you cannot trade during the opening hours, you may also consider trading during the last hour of trading. This applies both to the stock market and to future trading.
Day-Trading Forex
If you can't trade during stock market hours, the foreign exchange (forex) market is open 24 hours a day during weekdays. This makes it a flexible alternative if you have a busy lifestyle or you are in a timezone that isn't congruent with trading stocks.
Trading on the forex market involves trading pairs of currencies. The most popular pair to trade is the euro and the US dollar (EUR/USD). Other pairs that are popular to trade are GBP/USD, USD/JPY, and USD/AUD. These pairs tend to be most active during certain times of the day. Each part of the day has a different dynamic, and you may start to develop a preference for trading at a particular time.
Casual vs Part-Time
When trading part-time, you need to be aware of your mindset. Many professional traders work part-time, but they commit to certain hours of the day that will be the most productive. A casual trader will trade whenever they feel like it. This is not recommended, as it likely means you haven't done good research or planning. If your trading has no structure and you aren't aware of how the market acts differently throughout the day, you are not likely to see success.
Part-time traders don't spend long hours trading, but they do it regularly, at fixed hours. This helps to keep you sharp, focused and avoid mistakes. Being a part-time trader is a great idea. Being a casual trader will probably not lead you far. Treat it like a real part-time job or business, or don't do it at all.
Part-Time Pay
Many full-time traders who rely on trading as their sole source of income actually end up trading part-time. Through their research and efforts, they find that only a few hours in the day produce the results they want. Make sure that you trade during the best times of the day, and you can make huge profits in a short time. A part-time trader can actually yield the same profits as a full-time trader, with much less time wasted.
Start Small and Then Expand
Even if you have a lot of capital, don't play big when you are starting out. Every time you try a new strategy, start small. You can increase the stakes once you begin to taste success. Remember that the market isn't going anywhere anytime soon, but it may be challenging to accumulate money again if you lose money.
In Summary
A part-time day trader buys and sells securities. This may be stocks, futures, or forex. All transactions are completed within their work-time – they do not hold positions over multiple days. If you want to get into this field, you need to do a lot of research. Find the best times of day that fit your trading strategy.
You need consistency and regular trading. Learning how to successfully day-trade may seem like a huge task, but once you have understood the basics, you will only need to invest part-time hours. This can be a great way to make significant returns without losing long hours. Always remember that you trade at your own risk, and no strategy is entirely foolproof.