How to become a successful part-time forex trader

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.

Keys to Success in Forex Trading
The key to success in the forex market is to specialize in the currency pairs that trade when you’re available and to use strategies that don’t require around-the-clock monitoring. An automated trading platform may be the best way to accomplish this, especially for new traders or those with limited experience. (Check out some common mistakes that often trip up forex traders in “Top Reasons Forex Traders Fail.”)

Three ways to hone your skills as a part-time trader include:
1. Finding the Right Pairs to Trade
Although forex trading occurs 24 hours a day throughout the week, it’s best to trade during peak volume hours to guarantee liquidity. Liquidity is a trader’s ability to sell a position, which is much easier when the market is most active. Assuming that you work a nine-to-five job, you’ll be available for trading either early or late in the day. Depending on the currency pairs you’re trading, high volume may occur at either end of those timeframes to conduct trades.

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.”)

USD/EUR
USD/JPY
USD/GBP
USD/CHF
USD/CAD
USD/AUD
For part-time traders with more experience and time to research conditions and circumstances that may impact currency prices, the following pairs also offer high liquidity:

EUR/GPB
EUR/JPY
EUR/CHF
Experts advise trading only the USD/EUR pair for the part-time trader who has a limited trading window. This pair is most frequently traded and there’s an abundance of readily available information on these currencies across all forms of media.

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
Part-time traders may opt to trade on their own or choose an automated trading program to make trades for them. (For more on automated trading systems, see “Forex Automation Software For Hands-Free Trading.”)

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
Discipline and dispassion are essential for success for traders who spurn automated systems to make their own decisions. Part-time traders are advised to take profits when they materialize instead of anticipating wider spreads and bigger profits. This requires a degree of self-discipline in fast trending markets where favorable spreads can widen. Successful traders take profits when they can because a trend can turn around instantly due to unforeseen external events. Trailing stop and stop market orders may be imposed to protect against sudden market reversals and to minimize risk, but as mentioned previously, there’s no guarantee that an order will be filled at the anticipated price. (For tips on how to analyze your trading and improve, read “4 Reasons Why You Need a Forex Trading Journal.”)

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
Discipline, dispassion and trading the appropriate currency pairs based on your daily availability are the hallmarks of a successful part-time forex trader. For beginners, an automated trading program is considered the best way to break into forex trading, at least until there is a greater level of comfort with trading procedures.

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.

Source : https://www.investopedia.com/articles/forex/11/become-successful-forex-trader.asp