Here are 25 rules to consider if you plan to trade or are already trading part time. Trading for capital appreciation while working a full time job is possible but you must consider how to optimize your trading process so it doesn’t interfere with your work and also that you can execute your trading system consistently and with discipline.
20 Trading Rules for Part Time Traders
1. Part time traders must choose a time frame that they can trade on. Swing trading and trend trading are usually the easiest to take signals for whether it’s executed at the open or close. It’s possible to day trade if you work nights and have enough rest to be able to focus completely. It’s not a good idea to try to day trade at work as you likely will not be able to do your job or trade well with all the distractions.
2. A part time trader needs access to the proper trading tools to execute their system, most will need a computer with a charting platform, few will be able to trade on a phone alone unless the strategy is simple and doesn’t require speed in execution.
3. If you have a full time job then you don’t need to risk too much capital trading to pay living expenses so relax and just focus on learning how to trade, no need to take on too much risk.
4. Scan, research, and create you watchlist before you go to work. You shouldn’t be trying to find and add things to your watchlist during working hours.
5. Before you enter a trade have a trading plan with your entry, exit, and position size all mapped out. Make it easy to implement in real time without much need to analyze. Create your trading plan each day before you go to work.
6. It can be easier to not over trade when you have a job to do. Letting your winners run should be the goal of any trader so just go about your work when your trades are going in your favor and you have no exit signal yet.
7. Don’t watch every tick of price all day, just check in at the needed planned on times to check your positions, watchlist, and signals.
8. Looking for a 1:2 or 1:3 risk/reward ratio at entry is a good filter for quicker trading decisions. Quick formula for risk/reward ratio: (Entry-Stop)/(Target-Entry).
9. Ensure on entry you are not risking more than 1% of your total trading capital if your stop loss is triggered with your position sizing. Quick formula to calculate you potential account loss percentage: (Entry price-Stop price) x Shares / Total trading capital.
10. Your stop loss signal should be based on a technical level you have quantified. A price, pattern, or technical indicator.
11. Don’t act on a trade until your stop loss, trailing stop, profit target, or time stop is triggered. This saves a lot of time staring at positions and checking in too much.
12. Designate the specific times you will check in on your trades and stick to those times only.
13. Position size an amount that allows you to not stress out about your trades and allows you to focus on other things until it is time to trade your signals.
14. Trade a strategy you fully understand and believe in, this lowers a lot of the stress over expectations.
15. Know your trading edge and take trades that allow you to use it.
16. Run your trading like a business not a hobby. Businesses make money, hobbies lose money, you should feel like you are a business operator not a gambler when you place your trades.
17. Don’t let financial news headlines through the day distract you from your job or following your trading system. Stick to your plan, and plan for everything.
18. Don’t talk about your positions with other people it will only make it more difficult to stay unbiased in taking your signals. Be careful to not engage ego or emotions in your trading by sharing your positions with others.
19. Pick stocks for your watchlist that are not too volatile to trade with your strategy. You want to trade stocks that you can use inside your system to set and forgot while at work and only check on when needed.
20. Stay on your trading time frame, don’t drop down to a lower one when you are at work, just get out of a trade if you need to watch every tick.
Trading part time can be an advantage over those that overtrade sitting at their computer all day. As long as you are able to follow a quantified system with an edge and do your job with focus you can make money as a part time trader. Execute your strategy with discipline at the planned times you have for checking your signals and taking action, until then focus on your job.