Part-time traders have it rough. While we all like to think of electronic markets trading around the clock as a huge advantage, it doesn’t come without its hindrances. Just because a market is open doesn’t mean that the time you are present is an appropriate time to trade. Nor does it always mean that one has enough time to truly analyze the market in the manner that it should be, and make appropriate decisions based on the information absorbed. The window of opportunity for any part-time trader is relatively small, and few people adapt a trading philosophy around this it while truly finding a way to make it work.
Managing time is a huge roadbloack for many start-up traders, as they are simply not used to a fixed routine, not to mention trial and error / experimentation / learning curve gets in the path of clean consistency. Over the years I have received many emails asking me about when to trade, what to if a person only wishes to trade part-time, etc. Below, you’ll find some answers to some of these basic questions.
Tied to risk, TIME is an issue that needs to be catered to one’s personality type. Simply put, if your personality type looks for quick thrills and generally consists of little patience then trading part-time is going to be all that much harder thing to accomplish.
Finding short-term opportunity every day can be easy when you’re spending the bulk of the day on analysis. Even then, very high-probability trades based on your individual investment strategy is oftentimes scarce throughout the session. Thus attempting to pack in a full trading session where you end flat in 1 hour, or 3 hours with distractions is going to all that much harder to hone in and focus on what you really need to.
Bad traders tend to be full of holes. But all too often those holes are nothing more than deficiencies in knowledge, both current and long-term. With a lack of time available, relevant information can easily get skipped, putting the trader at a severe disadvantage.
Here are some quick tips that can potentially steer you in the right direction when it comes to managing your time as a trader:
1. Sync your trading philosophy with your personality type and the time you have available
I can’t tell you the number of traders I witness attempting to trade a certain program that goes against every essence of who they really are. Factors might interfere with their thinking on this matter, and time is certainly one of them.
Are you the type to be patient? Are you antsy and can’t keep still? If you tend to fall on the side of antsy and are a part-time trader, then you really only might have one option: adapt a short term strategy that you can deal with comfortably in the time you have and force yourself not to “overdo it”. In other words, take short-term trades, but don’t over-exert yourself in terms of the number of pairs you are trading. Proper analysis takes time, and if you are all over the map in terms of what you can reasonably absorb in during a single session you are likely overdoing it.
If you are more of the patient, systematic type, then you are likely better suited towards longer term goals. You might employ the use of limit orders for execution or simply drift in the way of longer term technical or fundamental plays. Stops and take profits are big and risk is typically much lower. People without a lot of time on their plates might prefer a longer term strategies as they’re simply not there to watch every tick, nor do they care to. Full time traders that use longer term strategies are usually invested across a range of currencies, adding more diversification to the pot (not to mention keeping them very busy throughout any given day).
Whether your personality type caters to a short, medium or longer term trading philosophy all depends. Regardless, this should be step one with step two focusing on fitting that philosophy within the boundaries of time that you have available.
2. Never sacrifice sound analysis
If there is one area that you never want to skimp on is sound analysis. Traders that omit relevant chunks of information are really doing nothing more than blindly looking at a chart and making an uneducated guess as to what will happen next. Take the little time that you have and absorb yourself in analysis. If you do not have the time to study the context of all pairs available, then don’t plan on trading them. Sound analysis is essential. If I look back at any of my regrettable moments as a trader, they usually occur simply because I missed something small prior to execution. Once I realize a mistake was made, I would have no choice but to cut the cord…a painful exercise. Use your time wisely and only execute when your level of confidence is extraordinarily high.
3. Dig deep and do it fast – avoid the distractions
Phone ringing off the hook, TV blaring in the background, looking at general news sites or YouTube are simply horrible for your trading. As with any other work, they pose a huge distraction and are the quickest way to get deterred from obtaining vital information that is going to do nothing more than help you in terms of execution. Take the little time that you have and simply eliminate distractions that pose a threat to clean, concise and deep analysis that is simply required for your progress. Shut the door, block out the noise and focus.
4. Adapt to a systematic way to absorb information
I typically use a linear approach when it comes to analysis with a major emphasis on organization. Traders that are unorganized in their analysis, or simply click through from one topic to the next tend to end up scattered or confused.
I start with specific, reputable news sites: those that usually provide me with “big picture” views on current happenings. These are all at the front of my bookmarks and easily accessible. “Fun” bookmarks are categorized separately and stay away from the ones that matter most.
For any specifics, I then drill down into my intraday news feed activity. I check correlations and other markets in order to develop a well-rounded and all-encompassing knowledge bank of the current situation. Once I make a general determination that I am satisfied with my knowledge of the environment I start drilling into charts. I do the same simple analysis I have been for years, looking across multiple timeframes and breaking everything down into smaller components.
While I don’t consider it to be strictly “top down”, it is structured. I start with a macro picture and make attempts to break things down into smaller components. Traditional top down analysis does have its deficiencies: if you are making determinations based on a macro view alone and that view is wrong, everything that follows is a wash and you could potentially be setting yourself up for disaster. Keep a global approach in mind and realize that market timing is just as crucial as any other component.
5. Don’t force a window of time
Risk management rule #1: don’t do anything at all. Simple? Yes. Commonly done? No.
If you happen to prefer a short window time in terms of average trade length, you have to understand the ramifications that go along with it: you will have days where you are simply not comfortable with any trade, regardless of the time you invested in analysis. Analysts are publishers and make every effort to force activity down the throats of readers every chance they get (not to mention most are brokers = you trade, it is good for them). The bottom line, however, is if you can’t make money from what you know, you shouldn’t be doing anything. You should enjoy trading and everything that goes along with it, so don’t try to force something that just isn’t right.
Over the years I have seen a massive range of trading strategies that encompass different windows of time, but a trader shouldn't be picking this philosophy based solely on this factor alone. Free time is something that is precious to us all, but using it wisely and positive P&L is about the only thing that will allow us to have more of it. In a business where “timing is everything” manging your workflow is just as vital as any plan of trade execution.