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5 Tips for Successful Part-Time Stock Trading

While many traders and investors strive for the goal of trading the markets full time, it is important to realize that this goal is not typically obtained overnight. The transition to full-time trading is more often a combination of effective research, money management and strategic thinking – all needed to...


While many traders and investors strive for the goal of trading the markets full time, it is important to realize that this goal is not typically obtained overnight. The transition to full-time trading is more often a combination of effective research, money management and strategic thinking – all needed to build a business model that eventually becomes a trader’s source of income.

For investors who want to actively participate in the market but still keep their day job, there are several steps that can be taken to trade the market successfully.

1. Define Your Strategy

When it comes to defining strategy, it is important to realize the various types of trades and how they fit within different market segments. Regardless of whether you are trading full-time or part-time, it is critical to understand the areas of the market where you experience the most success. Are you a contrarian or countertrend trader or are you more successful in identifying pullbacks? Do you regard yourself as a momentum trader and enjoy looking for breakouts?

Regardless of what the answer is, it is imperative that you build your watchlist with stocks that are in line with the types of strategies you want to employ. For example, looking for breakout moves and fast-moving momentum trades with a blue-chip stock is going to be much more difficult than if you focus on a growth stock.

2. Develop Your Watchlist

A critical step to trading the market successfully part time is to develop a quality watchlist. This list of trading candidates will serve as the pool from which your trading decisions originate. This list of stocks can be compiled based on various combinations of fundamental or technical data. Many traders use market scanners and screening tools to identify stocks that have a particular P/E ratio, market capitalization or fall within a particular price range that they are comfortable with.

Once the list has been developed, it will require occasional maintenance as stocks either begin to fit the preselected categories or fall outside the specifications the trader has outlined. It is wise to typically start with five to ten stocks that you are familiar with and build on that as you become morecomfortable with their characteristics and need to identify new trading setups.

3. Avoid Overtrading

Overtrading is one of the most common traps that part-time traders face. Once a new position has been established it’s only natural to want to watch the trade and monitor its performance. While keeping abreast of your decision is smart, it can also cause one to unnecessarily tinker and micro manage the trade. Over managing your positions once they have been put into motion can involve moving the stop loss levels unnecessarily or “adjusting” your profit objectives based on the levels of fear or greed that you feel at that particular moment. It is at these points where you need to be extremely clear about your thesis and overall goal of the trade. By sticking to the plan and letting your stop and profit taking orders serve their purpose, you can avoid a fair amount of self-sabotage in your trading.

The multitude of different time frames from which you can trade can often lead us to trading shorter intervals than you should. As a general rule, the shorter the timeframe, the more decisions you’ll need to make. Because you are approaching this from part-time perspective, you want to make as few decisions as possible to remain focused on other responsibilities. For example, if you are not comfortable making a decision in the market every 10 minutes, you should not be trading a 10 minute chart. However if you are comfortable making a decision once a day, then a daily chart should be the interval your initial decision is based upon.

4. Time Management

While full-time traders have the benefit of devoting a complete work day to their ideas, the part-time trader is not always focused on the market. Because of this, time management is of the essence. Part-time trading essentially equates to having a second job; however, it doesn’t have the same time commitment as working for a traditional employer. While everyone requires some downtime, the part-time trader must utilize a portion of that recreational time to search, develop and execute their investment ideas. 

Devoting just an hour or two a day to exploring new trading strategies or scanning the markets for a new stock will uncover new opportunities on a regular basis. Please consider your financial condition, investment objectives, time horizon and expenses before making any investment decision.

5. Understand the Tools

Finally, the understanding of your trading tools and resources is paramount. With all the bells and whistles that most modern trading platforms offer, it is easy to overlook some of the details that can potentially make or break your trade. Order entry with your brokerage is one of those areas.

Understanding the difference between a stop limit and a stop market order can have a significant influence on the outcome of your trade. Becoming familiar with the detailed workings of a scanner, order execution platform and research tools, can help avoid missteps when it’s time to make decisions about a trade.

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