Why do you want to trade forex part time?
Before getting on to the part of learning how to start trading forex part time, I want to lay down some ground rules. In order to do so, I want you to ask yourself this question, why do you want to trade forex part time?
Is it because you have lots of time in hand even after working a full time job and you want to do something to keep yourself occupied?
Or do you want to trade forex part time because you want to create an additional income stream and build wealth for yourself?
Do you understand the difference between the two? The difference is the seriousness.
If your answer is yes to the first question, then it is highly likely that you are not understanding the seriousness of this business of trading.
And if you say yes to the second question, then you are on the right track and I hope you make it big.
This is a common problem not only among part-time traders but also among full time traders, they do not treat trading right.
They either take it too casually or they have these obnoxiously unrealistic expectations which just go on to lay their foundation to failure.
Before you begin your part time forex trading journey, I would sincerely suggest you get your priorities right and make sure that you have your mind in the right place.
You have to treat trading right and you have to acknowledge the fact that this is a serious business and you are going to be completely responsible for your success.
If you think that you have what it takes to sustain in this business and you are ready to do whatever it takes to improve your chances of becoming a successful and consistently profitable trader then you are at the right place.
Read this blog post and all the other blog posts that have been uploaded on the website and I assure you that you will find immense value from them.
How to start trading forex part time?
Now that we’ve got our priorities right and have our heads in the right place, let’s discuss how you can become a part time forex trader.
1. Learn the basics
This is the first step that you will take towards part time forex trading and it is an essential step. What do I mean by learning the basics?
By basics, I am referring to the forex market. You should know how the forex market functions and what moves the market. You should know about the currencies, their pairs, their fundamentals, etc.
You should know about the market mechanisms and everything that happens on the back end i.e. the broker’s side. Now, you do not have to do a Ph.D. on all of this. You simply need to be aware and have a decent knowledge of things.
Isn’t it better to know about what you are getting into rather than learn all of this while you have already dived into it? This may very well help you avoid making unnecessary rookie mistakes that could have been avoided if you began right.
If you want to learn all of this without wanting to move from one website to another, then check out the blogs section. You will find everything you need.
2. Select the right trading style
Having the right trading style is very important in forex trading.
Different traders have different trading styles that choose according to their personality and preferences. Positional trading, swing trading, day trading, and scalping are the different trading styles that one can choose from and trade accordingly.
Now, different trading styles will have different characteristics.
Positional trading requires the least time as positional traders trade based on the highest of timeframes and positional trades will take the most time to play out.
In positional trading, traders do not have to constantly keep track of charts. Positional traders look at the charts only when the price approaches price levels of their interest.
Swing trades on the other hand require a little more time and in this, the trades will play out within a matter of weeks, as swing traders trade based on the 1 hour or 4-hour timeframes.
In swing trading, traders will have to be attentive to charts but it still isn’t much. In this too, traders will have marked their areas of interest and will trade only when the price reaches those levels.
Day trade will require even more time and the number of trades that the trader will take increases exponentially as traders will be done with the trade within the span of a single day.
Day trading does not mean that traders will take trades every day. Like swing and positional trading, day traders will trade only when they spot good opportunities.
Scalping is the most time-consuming trading style and it requires traders to be glued to the trading screen for that time period they are looking to scalp the forex market.
Scalpers have to be very quick in whatever they do as trade opportunities may come and go in a jiffy and they trade on the smallest of time frames.
Before you select your trading style, you have to first decide how much time you can dedicate to trading. Once you have decided this you have to decide whether you can look at charts daily and whether you can dedicate some hours of your day every day to this purpose.
You have to take all this into consideration as different strategies have different requirements. I have mentioned some of the basic requirements of these styles above but I would suggest that you do your own research, weigh the pros and cons, and then make an informed decision.
3. Select the right strategy
After deciding on the trading style that you are to go ahead with, you have to pick a strategy that will allow you to capitalize on the price movements of the currency pairs.
There are several strategies out there for each trading style and each strategy serves its own purpose.
Strategies may be based on technical indicators, technical patterns, important news releases, sentiment analysis, etc. You have to decide what strategy suits you the best.
It might seem like a daunting task but if you put in the work, you will increase your chances of becoming a successful trader.
A trading strategy is very crucial to your trading success as it is that aspect of trading that will allow you to profit from the price swings of the currency pairs.
I have done a blog post on how to choose the right trading strategy, so do check it out and make things easier for yourself.
4. Develop a trade plan
A trade plan is made up of four aspects, a good trading strategy, proper risk management, proper trading psychology, and discipline.
If your trade plan has all the four pillars laid down properly then you are simply putting yourself on the path to successful trading. All four aspects of the trade plan are equally important.
Even if you fail in one aspect, you are going to fail in the entirety.
I have discussed the importance of having the right strategy but let’s discuss the other three aspects.
Risk management is the only holy grail in trading. This is the aspect of trading that will keep you in the game and protect you from going bust.
Risk management is all about limiting your risk exposure in the trades that you take. There are several ways to manage risk, you can have a stop loss, size up your position accordingly, hedge your position, etc.
In order to manage risk properly, you should first set a risk parameter for your trades. This means that you should have a fixed percentage of your trading capital that you will be comfortable with if you lost it.
I would suggest that you never risk more than 1-3% of your entire trading capital on any given trade.
Trading psychology is basically all that goes on in a trader’s head while they are trading. Wrong trading psychology is allowing your emotions to take the better of you and it influences your trading decisions.
We as traders cannot afford to do this as trades taken based on emotions or gut feeling usually end up in losses as there is no practical rationale behind it.
Traders have to stay practical and analytical in their approach and they have to learn to control their emotions whenever they trade.
I believe that trading psychology is directly related to the trader’s confidence in the trade plan. So the higher confidence you have in your strategy and in your risk management, the better control you will have on your emotions.
This might sound very easy but it is one of the most difficult aspects.
If you have the best of strategy, manage risk absolutely perfectly, and never let your emotions take control, you will still fail if you aren’t disciplined in your actions.
Now, what does discipline mean? Discipline means showing up every day and following your plan and process without fail.
Every trader has a defined process to follow. It includes everything from planning before the trades, managing trades while they are open, and post-trade actions that traders must carry out.
Discipline can be attributed to the level of seriousness of the trader. If the trader takes trading seriously then he will be disciplined and if the trader takes trading casually then discipline is too much to ask from such traders.
5. Find a good broker
The fact that I have mentioned this, says a lot about its importance. Finding the right broker is very important in forex trading and if you fail to do then you will never make it big.
The forex industry is plagued with lots of malicious brokers and these brokers have scammed many innocent individuals.
You have to put in the work to research different brokers and ensure that they are reliable, regulated, and not scammers.
One way to find a good broker is to see whether they are situated in a country where there are strong regulators.
The next thing to look for in a broker is their reviews on the various forex trading websites like forexpeacearmy.com and others.
You should also avoid brokers that provide too many freebies in order to lure you to open accounts with them. No genuine broker will have such marketing strategies to convince individuals to take their service.
These are just some ways to find good forex brokers. If you want to know this in much more detail then check out the blog post on how to find forex brokers.
Tips for part time forex trading
If you are going to start your part time forex trading journey and have already worked out the above-mentioned steps then here are some tips that will help you out on your trading journey.
1. Set a routine for yourself
Since you are opting to trade forex part time then it means you already have other full time commitments. In such a scenario, having a set routine will do wonders for you.
By routine, I mean that you should manage your time properly. We have only 24 hours in a day and we have to make the best use of them.
You should literally write down how you are to spend your time daily. This will help you properly manage your full time job as well as your part time forex trading.
By doing this you can also find out where you are wasting your time and that can be spent doing something constructive.
2. Practice before going live
There will be things that may be new to you. The entire forex market may be new to you, or a particular trading style or a strategy may be new to you.
Before actually starting trading in the forex market, you should spend some time paper trading or trading in a virtual setting. This will help you get in the groove, hone your skills, and get you ready to face the real battle.
Not many people see the importance of practicing but I would sincerely suggest that you put in the time to practice.
3. Maintain a trade journal
Forex traders, irrespective of full time or part time, must maintain a trade journal. There are so many benefits of trade journals that I have done an entire blog post on it in detail.
You being a part time forex trader will need a trade journal even more. Since you do not have the entire day to dedicate to trading, you cannot spend a lot of time identifying your mistakes or your shortcomings.
A trade journal normally has details about everything you do and this will help you know where you need to improve.
4. Trade with the right mindset
Trading is a serious business with its ups and downs. You will never make a profit all the time and you will have losses from time to time.
It is essential that you do not get discouraged by these losses and it shouldn’t be a roadblock in your trading journey.
You should also understand that trading is not a get-rich-quick scheme. You will not become a millionaire or a billionaire overnight by trading forex.
Trading, in general, is a business of taking small profits in the short term and compounding them in the long term to build wealth.
In trading, going slow is going fast. If you do not rush things and let them take their time, then you will surely make it big in this business.
5. Have a mechanical system
A mechanical system means that you should have a trading system that is fixed and is very analytical.
Since you are going to trade forex part time, you do not have the time to be very discretionary. You should have set rules for your trading, that if a condition is met then you take the particular action and if the condition is not met then you just sit back and wait.
Many part time forex traders often have a set and forget system where they set an alert on their charts that indicate them when the price reaches those levels.
They would then set their buy or sell orders, stop loss and take profit orders well in advance and they leave. They just take a step back and allow their plan to play out.
When are you going to start trading forex part time?
Let me know when you start out on your part time forex trading journey and also let me know if the blog post was of any value to you.
Do share this blog post with everyone you know that may be looking to trade forex part time.
Feel free to ask questions through the comments section and I will make sure to get back at the earliest.