Hi guys, hi from Andrea Unger! Today, I’d like to talk about part-time trading. Is it a good idea, or is it too difficult to manage?
When people ask me questions about the trader profession, I always tell them that becoming a trader is very hard and that trading is not only difficult, but also dangerous. Nevertheless, I think part-time trading is possible.
Of course, when I say “part-time trading” I don’t mean sitting in front of the computer after a full day of work and scalping the Forex for a couple of hours before going to bed. This is something only certain people can do, as it requires a special talent.
Besides the talent thing, there’s another reason why you shouldn’t try doing this. Unfortunately, the Forex market doesn’t move the right way to allow for scalping during evening hours CET. This is my opinion, so don’t start thinking I’m an idiot and I don’t know the Forex well enough.
Another problem is that scalping requires intense concentration and this is certainly not very easy after a full day of work, when you are physically and/or mentally tired. In addition, spending all nights in front of the computer would probably impair your private life. You would spend less time with your family and friends, shattering the balance in your life.
The reason why I advise against scalping is that it requires a special talent that only a few people have and that is very hard to both teach and learn. So, what would be a proper approach in part-time trading?
Basically, I think some swing trading or short-term trend-following strategy could produce good results. Systems should work on daily bars, so that, when you get up in the morning, the previous session has finished, and you have all the information you need to place your orders.
When you place orders, you should add a stop-loss and, if need be, a take profit. In this way, you put everything on the broker’s server or directly on the market, if possible, and can forget about it. You close your platform, shut everything off and go to work or wherever you want to go to.
Of course, as these strategies aren’t likely to trade very often, the periods of drawdown that every strategy always faces might be quite long.
Facing long drawdown periods might have a strong psychological impact. This is normal, so, don’t expect these strategies to make money every single week. Always have an idea of how long drawdown periods can be before starting and figure out how to react when they happen.
In order to do this, you’d better identify some number that tells you when your trading activity should be stopped. This number could be, for instance, a drawdown level or a certain number of losses. It could be anything you want, because it depends a lot on your psychology. The important thing is that you set a limit and don’t exceed it.
In order to increase the survival chances of these strategies, you should structure them in a pretty simple way. If you build very complicated strategies by setting hundreds of parameters and limitations that make them work perfectly in the past, it’s very likely that, as soon as you put them live, you’ll lose your money due to overfitting.
Simple strategies, instead, work much better. Imagine a strategy that works on a trending market, buys the breakout of the high or sells the breakout of the low of the last daily bar, it’s very simple, isn’t it? Then, in order to limit activity, you can add some simple filters.
For instance, you can decide to enter only after a low volatility stage, a congestion or some slow activity you can measure with an ADX (for example, you can decide to enter only if the ADX oscillator is below 40). So, you don’t have a high acceleration in prices and wait for a move that is supposed to be a good one to enter. Always remember to place a stop-loss together with the initial order.
Very simple strategies, like the ones I’ve just mentioned, have more chances to survive bad periods. The reason is that basic codes are more robust, as they are based on concepts that have been working for years. However, the fact that they produced overall good results over the years doesn’t mean that they’ll make money every single week or month. So, always keep in mind that there are also periods when these strategies lose, so be ready to face them.
To sum it up, part-time trading can be done. However, you should treat it the right way and be aware of its psychological impact.
Always trade what you can afford to lose, of course, and don’t try to become the next Rockefeller risking too much. So, fill your trading account only with amounts of money you can afford to lose, because trading is very dangerous.
This being said, I don’t advise full-time trading. In fact, I’m not saying that full-time trading is less challenging from a psychological point of view. It’s very challenging as well, although perhaps you face it with a different attitude and different expectations.
Part-time trading is fine, but it might be very challenging, as you might not get the good results you expect. You may get disappointed and lose confidence in it. So, build a plan and stick to it as much as you can.
Full-time trading is also very challenging. However, it can be even more challenging if you do it in desperate conditions. For example, there’s nothing worse than resorting to trading after losing your job. I talk about this quite often, so you must be aware of this.
Trading should be seen as a dangerous and difficult job that cannot be learned with a couple of online lessons. It takes time, commitment, discipline and a professional attitude.
That’s all guys, I hope this was useful. Stay in touch!
Ciao from Andrea Unger!