Part-time forex trading can be a successful way to supplement your income. There are enough hours in the day to trade in this potentially profitable market, even if you hold a full-time or part-time job. In this article, we’ve outlined some tips to help get you there.
Three ways to hone your skills as a part-time trader include:
For small traders with mini accounts and beginners who lack experience, trading U.S. currency against various foreign currencies is advised. The great majority of dollar volume traded on forex markets occurs in the currency pairs below. It may be wise for part-time traders to restrict trading to these briskly-traded currencies due to the strong liquidity in these pairs. (For more information on global currencies, read “Top 8 Most Tradable Currencies.”)
Conversely, experts discourage part-timers from trading two foreign pairs that may require more sophisticated knowledge and lack the same level of information as the USD/EUR pair. (To learn more about trading the U.S. dollar, check out “Play Foreign Currencies Against The U.S. Dollar – And Win.”)
2. Set Up an Automated Trading System
There’s a variety of automated trading programs with a full spectrum of functions available on the market. Some of them may be able to monitor currency prices in real time, place market orders (impose limit, market-if-touched, or stop orders), recognize profitable spreads and automatically order the trade. Please note, however, that even if a trade is ordered, there’s no guarantee that the order will be filled on the trading floor at the price expected, especially in a fast-moving, volatile market.
A so-called “set and forget” program may be the best way for a beginning part-time forex trader, which allows the software to make automated decisions. Several automated programs offer a simple “plug and play” capability – an easy way for part-time beginners to start trading. This is one of the major benefits of automated trading – it offers disciplined, unemotional trades. Experienced part-timers may prefer a more hands-on trading approach by selecting automated trading software with more programmable options.
3. Apply Disciplined Decision-Making
Part-time traders with little or no experience are advised to start trading small amounts of currency. By opening a mini forex account, which requires a smaller-than-standard cash deposit, traders can control 10,000 currency units (the standard currency lot controls 100,000 units of currency).
Minimum cash deposits for a mini account may start at $2,000 and can be as high as $10,000.
The potential profits and losses can be substantial due to the leverage offered to traders, which can run as high as 400-to-1. Leverage allow traders to buy currency lots on margin, permitting them to put up only a fraction of the cash represented in a currency lot. For example, only $1,000 is required to trade a currency lot worth $100,000 with 1% margin. However, traders should be aware of the inherent risks that come with taking in too much leverage. (For more insight, check out “Forex Leverage: A Double-Edged Sword.”)
The Bottom Line
However, there’s no guarantee that you’ll make a profit due to the volatile nature of currency markets. Smart, knowledgeable, experienced traders – and even beginners at forex trading – will have a better chance to profit if they follow the few simple principles described above.