The vast majority of people in the markets are there only in a limited capacity. They manage their retirement investments, sometimes dabble in the stock market and may play forex or commodities nights and weekends. The markets are not, and probably will never be, the part-time trader’s main source of income.
That does not make part-time traders any less important in the scheme of the markets than professional traders. Nor does it mean part-time traders cannot achieve a level of performance comparable to—or even better than—their full-time counterparts. In fact, it’s quite the contrary.
It’s about Efficiency
The No. 1 tool all part-time traders need to succeed is efficiency. That basically means maximizing their available time to create the largest positive results.
Think of the elements of trading: education (which should be ongoing), market analysis, trading methods, identification of trading opportunities and position management. All of these tasks take time. In fact, making the actual trade should require the least amount of time. Why? Each trader should have an established process that quickly highlights opportunities, and the actual management of a position should take hardly any time. The bulk of a trader’s time should go into defining the processes used to identify trades and manage positions.
Think about it for a second. Consider all the hours of reading, listening and watching videos that go into learning about trading and the markets. Now add up the time spent determining a workable trading strategy. It is often thought that the money put into the markets is the investment, but the investment of time for education and planning is just as meaningful, if not more so. And since markets are continuously changing and evolving, that investment must be continuous.
That is why it is so important for the part-time traders trade execution to be as quick as possible. And traders who have extremely limited time must use the most streamlined processes.
Minimizing the amount of time required to identify and execute trades starts with selecting a trading style or focus that is conducive to doing so. Some ways of trading are labor intensive and require a great deal of preparation to pick out potential trades and/or to manage open positions. For most part-time traders, methods like that are not good choices.
So what trading approach provides solid opportunities for profits while requiring little time to implement? For most people, it’s trend following.
If the Shoe Fits …
For the sake of this discussion, trend trading means taking a position in a market or instrument where persistent directional movement is expected. Most people understand that prices, in general, are either trending or in a range. Trend trading...