In any case, the considerations of a part-time day trader are different from a full-time trader.
Here are 10 tips for the part-time day trader.
1. Pick a suitable market for part-time day traders
There are markets all over the world trading around the clock. You can certainly pick one that is active during the time you are free to trade.
For instance, part-time day traders in Asia day trade (or rather, night trade) US markets at night after their work. The first two hours of US opening fits nicely into the slot before Asia’s sleeping hours.
For part-time day traders in the US, you can consider trading Hong Kong’s HSI or Korea’s KOSPI futures.
2. Watch the foreign exchange rates of markets you day trade
This point relates to the first on choosing a suitable market. Most part-time day traders will end up deciding to trade overseas markets due to their commitments during regular work hours.
Trading an overseas market typically requires you to deposit funds in a foreign currency and exposes you to foreign exchange risks. Watch foreign exchange rates as its fluctuations will affect your returns.
3. Do not trade the entire trading session
Regardless of which market you choose, it is wise to restrict your trading to the first two and last two hours of the session.
These periods are usually more volatile with more trade setups.
By focusing on the most volatile time period, the part-time day trader can spend less time watching the markets while minimizing missed trading opportunities.
4. Choose a time-sensitive day trading setup
A time-sensitive trading setup is a trading strategy that capitalizes on the behavior of the market at a certain time of the day.
As these trading strategies occur only during certain times of the day, part-time traders can simply focus on those time periods to make full use of their time.
Kevin Ho’s 15-minute opening range scalp trade is an example of a time-sensitive trading setup and is an excellent choice for a part-time day trader.
5. Do not rely on hot day trading tips
This advice applies to all traders and investors, not just part-time day traders. However, hot tips are especially tempting for part-time day traders.
Part-time day traders might lack time for performing their own analysis. Hence, some might think of making up for that by relying on other people’s analysis, which are essentially tips from fellow traders or their favorite finance blogs.
That is an extremely bad idea.
Day trading part-time is still day trading. A part-time day trader should adapt and make the most out of his or her limited time. This is very different from cutting corners.
You either do it right, or not do it at all. Do not turn your trading platform into your personal casino.
6. Consider automated day trading
If you are well-versed in programming, you might want to consider automated trading.
Automated trading is ideal for part-time day traders. You work in your day job while your trading platform trades for you automatically. You can devote your free time to developing trading systems.
However, this is not for everyone as automated trading has a peculiar set of risks. You should take time to understand them before embarking on it.
If you are keen to code and trade your own trading systems, Trading Systems and Method by Perry Kaufman and Building Reliable Trading Systems by Keith Fitschen are good resources to start with. You should also simulate your trades before going live.
Also, check out these ten courses on automated trading.
7. Maintain a full-time day trader’s view on risk management
Although day trading is a part-time endeavor for you, it does not mean that you can overlook day trading risks. Risk management has many aspects including position sizing, cash management, and operational risk.
You should learn about the different position sizing models and control your trading size to avoid the risk of ruin. (Bennett McDowell’s book is a good starting point.)
Cash management is especially important for part-time day traders aspiring to move into full-time day trading.
It involves how much of your profits do you withdraw regularly and how much do you use to grow your day trading capital. Consider your personal finances from the point of view of a full-time trader to answer these questions.
To mitigate the operational risk of day trading, you should at least backup your trading terminal regularly, have a spare power source (use an Uninterruptible Power Source) and internet connection, and have your broker’s number on speed dial.
Despite being a part-time job, it is still a job that puts your capital at risk. Be professional about it.
8. Never day trade at work
Day trading requires complete focus. No matter how tempted you are, never trade at work.
You might enjoy optic fiber broadband internet speed at work, and you just downloaded a top-notch mobile trading platform from your broker. You might be tempted, but don’t.
Imagine that your boss calls you away from your desk before you could place your stop, and you return to find your trading account wiped out. Or a sudden loss of connectivity on your iPad that has the latest version of your broker’s trading app.
Too many things can go wrong when you trade in the office.
9. Review your trades on weekends when you are not day trading
Part-time day traders have limited time on weekdays, so we need to use time efficiently.
We apply the principle of batch processing, which is the grouping of similar tasks and complete them together.
On weekdays, focus on following your rules and trading well as your time is limited. On weekends, combine your trades and review them.
By grouping your tasks in this way, you take the time pressure off your weekday trading sessions, and enable yourself to evaluate your trades in detail on weekends.
10. Consider swing trading instead of day trading
I know, this is an anti-climax.
But swing trading is a sensible option for traders who are short of time.
Ultimately, for most people, day trading part-time is like holding on to two jobs. It takes a toll on your health and you might be burnt out.
If swing trading is acceptable to you, in terms of the capital required and overnight risk exposure, you should consider it seriously.
It is much easier for the part-time trader to analyse after the market ends each day, and place your order before the market opening.
Moreover, most of the trading strategies we cover here at Trading Setups Review work for both day trading and swing trading.