Forex Trader

How to Prosper as a Part-Time Forex Trader

The forex market remains one of the biggest entities of its type anywhere in the world, with an estimated daily global trading volume in excess of $6.6 trillion.

What’s more, this value has increased markedly since 2016, from a starting point of just $5.1 trillion. This has been driven by a combination of technological advancement and continued economic volatility, which has driven part-time traders to the market in their droves.

While the market may be more accessible than ever before and open 24/7, however, this remains a volatile entity that’s incredibly difficult to master. So, here are some tips to potentially help you prosper as a part-time trader.

 #1. Find the Right Pairs and Times to Trade

If there’s two things that will shape your journey as a forex trader, it’s your choice of currency pairings and the timing of individual orders.

In terms of timing, it’s best to trade during peak volume hours as a way of optimising liquidity and your ability to sell assets in real-time. Of course, optimal timing also depends on your choice of currency pairings, alongside the commitments imposed by your day job.

Forex Trader

For example, if you work a traditional nine-to-five job, you may be looking to trade during the evening or early morning. In this case, you could target minor pairings like the GBP/JPY, trading between 7am and 8am GMT to capitalise on the crossover between the European and Tokyo trading sessions.

This hour (during which both the London and Tokyo stock exchanges are open) will see a marked increase in liquidity and volumes for this pairing, while you can execute orders before you start your day at work.

Other prominent crossovers include the European and North American session, with both entities open and trading between midday and 4pm GMT.

So, if you have the time and trade major assets like the USD/GBP or USD/EUR, you should target this window as a way of optimising potential profitability and ability to sell assets or implement short-term scalping strategies.

#2. Create an Automated Trading System

There’s no doubt that forex automated trading systems are all the rage in the digital age, and such algorithm-driven robots offer a unique opportunity to optimise both the volume and timing of your individual trades.

Forex trading systems work by automating trades, while deploying features such as the real-time tracking of currency prices and market order placement to afford you control over how your strategy is implemented.

A good example of this lies in the form of stop losses. This refers to a limit that’s imposed on an open position, requesting that this be automatically closed once it has incurred a predetermined level of loss.

This way, you can execute orders automatically while you’re at work, without sacrificing control and ensuring that the risk and scale of loss is minimised.

For example, let’s say that there’s an unexpected hike or decline in the base interest rate that’s relevant to one of your target currencies. While it’s well known that interest rates impact the stock market, they can also influence real-time currency prices, leaving your position exposed to the risk of sudden changes.

Stop losses can help in this respect, as you can factor potential changes and risk factors into your automated trading strategy.As a beginner or part-time trader, you may also want to utilise software that’s capable of making automated decisions on your behalf.This is commonly referred to as ‘plug and play’ capability, which underpins disciplined and strategic decisions that are completely free of human error, emotion and preconceived notions.

While more experienced traders will evolve their knowledge base and often come to rely on more hands-on trading over time, there’s no doubt that automated forex systems offer immense value to novices in the forex marketplace.

 

 #3. Leverage Disciplined and Deterministic Decision Making

As we’ve already touched on, discipline is crucial to successful trading decisions, particularly if you want to record a viable profit over an extended period of time.

Conversely, emotion and passion are the enemies of sustainable profitability, as such feelings can compel you to make rash and ill-considered decisions that ultimately cost you significant sums of cash.

Remember, trading is built on the notion of accepting profits when they materialize, rather than following unrealistic expectations that you can access wider spreads and vast returns continually.

This type of cold, hard outlook requires a keen sense of discipline and determinism, as you’ll need to recognize that there remain a number of underlying rules that govern market shifts and create the type of volatility that influences the scale of your gains and losses.

When it comes to individual decision-making, part-time traders should always manage their expectations from the outset and start by trading a relatively small number (perhaps one or two) major currency pairings. Such assets minimize volatility while optimizing liquidity, and enable you to establish a foothold in the market before you diversify into minor and exotic assets.

A similar mindset should also influence your use of leverage. More specifically, you should cap your leverage at a reasonable percentage of your starting capital or margin, in order to minimise losses and protect your assets as effectively as possible.

Of course, this type of disciplined and reasonable decision making is at odds with the romantic perception of financial market trading, which is why it’s crucial that you enter the market with the right mindset as a part-time operator!

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Christophe Rude

Christophe Rude

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