Net Trading

Seven Keys For Successful Part-time Trading

Stock and option traders are often inundated with promotional material in the form of direct mail, seminar promoters, software vendors, and the occasional infomercial late at nite that implies if you just had the secrets they contain that you too can build your fortune by trading stocks, options, and the like. However, one thing that many of the authors of these materials don’t consider is the fact that many people have jobs, families, and businesses that require your attention. While many people are drawn to the markets and sincerely have the desire as well as the will to apply themselves many of these promoters and authors are unable to understand the needs of part-time traders. This, unfortunately, leads many aspiring traders to the false conclusion that they cannot trade profitably since they are unable to trade full-time but this doesn’t have to be the case if the individual keeps certain key fundamental criteria to make money trading the markets.

First, you have to trade your own time frame. It is critical that you adopt a trading style that fits your own time frame. Don’t choose to be a intermediate stock trader but then try to be a daytrader too. Part-time traders have a limited time and its best to find an approach that complements both. By trying to utilize several different methods a part-time trader will rarely find the success that he or she is looking for. One trader that I know of was deeply involved with another business and had to stop trading short term options but adopted an intermediate stock momentum method. He only made 8 trades that year but made a 200% return.

Second, adopt a method that suits your personality. Time is typically a factor with part-time traders and many find that swing trading, trading in the intermediate time frames, and trading options can give them the potential returns they look for while fitting the methods to their own personalities. One trader I know of is a writer but trades momentum stocks off of the weekly charts. On the weekends he checks his charts, adjusts any stops if he has any positions, and enters buy orders for any setups that may show up in only 5-10 minutes on the weekend. In the last 8 years, he has never reported a losing year and in 4 out of the last 8 years has had returns of 100% +. Another trader I know of swing trades stocks on a simple pullback method he developed using a simple indicator while still working as an engineer at one of the major auto manufacturers and during his first year he reported profits of over $200,000. Each of these traders found methods that work along with their personalities.

The third thing that aspiring part-time traders must do, as well as professional traders, is to absolutely have a system of risk control in place. It is almost universal trait that traders of all levels of experiences focus more on entries rather than exits. Containing your losses is going to 90 percent of the battle for part-timers because many will not be in front of the screen and must learn how to set stop loss points, learn when to reduce or increase the size of the position, and how to use diversification to control risk. If a trader loses his capital then can’t play this game and, in some instances, without proper risk control a trader can end up owing a lot of money if they traded on margin!

The fourth key that’s important for aspiring part-time traders to keep in mind is to identify low-risk trades and be more selective. If there are a handful of stocks that are offering compelling reasons for a long position spend some time and research them closely to select the best one or two. Which ones are in the strongest industries? Which ones are in the strongest sectors within those industries? Which ones are the strongest subsectors within those sectors? Is there a stock that has the strongest fundamentals or gives the strongest technical setups to trade? By spending a few more minutes and examining the key criteria that you look for in a trading setup you can potentially lower your risk and raise the probability for a profitable trade by becoming more selective in identifying low-risk trades.

The fifth key for part-time traders need to have is an edge. An edge is any trading technique, method, or tool that gives that trader an advantage that can be exploited for trading profitably. An edge can be how a trader reads charts, studies price/volume relationships, selects stocks to trade, a system of trade management, or reads price patters. One very famous swing trader uses technical analysis, chart patterns, and volume studies to trade. In the late 1990, he turned an $11,000 account into $43,000,000 in only 23 months! Edges can be very simple tools that a trader has refined and has great skill in trading with.

The sixth key is learn how to be at peace with the inevitable losses that come from being involved with the market. When we are young we learn how to exist within a structured environment thru a series of rewards and punishments. In your home as a child, your parents would reward your good behavior and punish your bad behavior. As a result, you learned your boundaries and how to exist within that structured environment. When aspiring traders come to the market, however, they find that there is no structured environment and that the rules they learned when they were young no longer apply. The keys listed here are to help you survive and eventually prosper but you must relearn your own behavior in order to find the success you seek in the markets. If you can learn to love your losses while sticking the rules of trading you have set up for yourself then you are on your way to financial success. But if you lose sleep at night or in a constant state of anxiety because you fear taking a loss or have experienced a loss then you need to stop trading till you find the kind of peace that successful traders have come to understand that losses are just part of the business.

Finally, the seventh fundamental key for successful part-time trading is developing self-awareness. Every trader, beginner or professional, must be aware of personal weaknesses that may impede trading success and make the appropriate adjustments. From my own experiences, observations, and research, I have come to the realization that all traders experience confusion, frustration, anxiety, and the pain of failure. Self-discipline, determination, and self-control are key attributes one must have or develop within themselves in order to reach the pinnacle of success they seek in trading or any part of their life. Fortunately, these key attributes are not inborn but can be learned and strengthened much like you exercise a muscle which becomes stronger in time. You only have to spend some times developing your self-awareness and then once you have a grasp of your strengths and weaknesses you can create a plan to take action on them. This is fundamental for you to be at peace with the daily swings in the market as well as your own emotions in dealing with the market.

These seven keys for successful part-time trading are going to be fundamental truths to discover the kind of success you desire in trading the markets. Part-time traders often have many advantages over those traders who watch the markets all day and it has been proven that many part-timers are just as profitable. However, many would-be traders spend a lot of time on the external things like trading systems, stock newsletters, hot tips, and the like but rarely do the fundamental truths in real trading. Sadly, even rarer do they succeed with their own trading goals because these simple keys aren’t as flashy as the latest $7,000 trading software or $5,000 daytrading seminar. By devoting some time to work on these seven keys now and throughout your trading you will build a stronger foundation for your success.

Mr. Williams is a businessman and who has been trading stocks, options, and futures for almost 15 years. He has extensive training in systemic trading and technical analysis along with the insight that comes from suffering the highs and lows from trading for many years. He trades professionally and operates an educational website with the goal of helping aspiring traders as well as experienced traders achieve their goals in the stock market.