Day trading is considered one of the things many people are interested in, but they do not want to pursue it as a full-time profession or give up their current jobs to do so. In fact, many professional traders only trade part-time, trading for one to three hours a day, and then moving on to other activities. If you’ve considered trading part-time, the following strategies can help you make the most of your efforts in the least amount of time possible and prepare you for some challenges you may face.
Part-Time Stock and Futures Trading
Day traders only need to trade in the stock or futures markets for a period of one to three hours a day. Although some day traders trade all day, the highest possible returns in the shortest amount of time are usually concentrated around the official stock market open and close. These periods occur at 9:30 AM and 4:00 PM Eastern Time in the United States.
When you start trading stocks part-time, focus your attention on the market open. Be seated at your computer by 9:00 to 9:15 AM and get ready for your first trades. If you have very little time, the first 30 minutes are usually the most volatile period of the day, providing the greatest profit potential. If you have an hour, finish your trading by 10:00 or 10:30 AM Eastern Time.
If you have more time, extend your trading period until 11:00 AM Eastern Time. As lunch hour approaches, you’ll usually find fewer opportunities, and transactions will take longer to complete as volatility decreases.
If you can only trade late in the day or can trade near the market open and close, consider trading from 3:30 PM to 4:00 PM Eastern Time. Since day traders close all positions before or at the market close bell, the trading day ends at 4:00 PM.
These tips apply to the stock market, but the same times also apply to futures trading. You’re likely to see the largest trading volume and activity happen in the futures markets before and after the opening of the U.S. stock market. This is especially true for futures contracts linked to stocks, such as the E-mini S&P 500 (ES), one of the best futures contracts for day trading.
Part-Time Forex Trading
If you can’t trade during stock market hours, you can trade in the foreign exchange market (Forex) 24 hours a day during the week, making it a flexible alternative for day traders who have one to three hours at unusual times of the day or night to trade.
Trading in the Forex market is done using currency pairs, and the most popular currency pair is the Euro and U.S. Dollar (EUR/USD). Other popular pairs include GBP/USD, AUD/USD, and USD/JPY. Each pair tends to be most active during certain times of the day.
If you are trading the EUR/USD or GBP/USD currency pairs, which are recommended for day trading, the largest movement occurs around the opening of the U.S. stock market and a few hours after that, from 8:00 AM to 11:00 AM Eastern Time. If this time is not convenient for you, the hours from 1:00 AM to 8:00 AM Eastern Time are also a good time to trade.
Europe
open for business during these times, and although this period is not the most volatile, you will see tradable trends develop during this time. This also makes it a suitable alternative for people who do not like to trade close to the opening of the U.S. market. Each part of the day has a different dynamic, and over time, traders may develop a preference for a specific time of day more than others.
Intraday Trading vs. Casual Trading
One of the problems with casual intraday trading concerns your mindset. For example, many potential traders fail to distinguish between intraday trading and casual trading. Many professionals recommend intraday trading, and like them, you can trade every day during the best times of the day and then do something else in your free time.
On the other hand, being a casual trader means that you trade whenever you feel like it, or when time allows. This is not advisable, as it usually means you haven’t done any real planning, your trading lacks structure, and since markets behave differently at different times of the day, trading at random or casual intervals will not lead to a good strategic game.
Casual traders do not trade all day, but they trade regularly. Casual traders may trade for several days and then take a break for several days. These periods of activity and inactivity make you less sharp, slow down your reaction times, and make you more prone to mistakes.
You can certainly be an intraday trader, but do not be a casual trader. Trade on a desktop or laptop during a specific time each day, not on your smartphone in the work bathroom. If you are casual and disorganized in your trading, you will incur losses, while those who take trading seriously and work on improving their technique every day will take your money.
When engaging in intraday trading, do it right, and treat it like a part-time job or a business, or do not do it at all.
Part-Time Pay
Most full-time traders who rely on trading as their sole source of income end up trading part-time because they find that only certain hours of the day yield the best results for their strategies. Because of this, being a partial independent trader or a full-time trader often means the same thing. In financial terms, it means not giving up the potential for profit too much.
For instance, a part-time trader may find that they can earn an average of $500 a day by trading only during the best two to three hours of the day. If they force themselves to trade all day, they will sit and watch their screen during times when good trading opportunities usually do not occur, resulting in a very similar daily profit outcome, but much lower income per hour of trading time.
Trade during the best times of the day for your strategy, and you won’t miss out on much profit compared to trading all day.
The Final Word on Intraday Trading
You can easily trade intraday partially with stocks, futures, or forex. Learn the times of day that provide the best trading opportunities for your trading strategy. If you are trading stocks or futures, trading near the official opening or closing of the U.S. stock market is the best option for you. For the forex market, trading near the opening of the U.S. market or during the European session is considered the best time to trade.
Can
Partial trading can work well if you trade regularly. If you want to trade occasionally, you’re unlikely to achieve consistency, which means you might make some profits and then give them back. Learning how to trade successfully during the day might seem like a full-time job, but once you master your strategy and technique, day trading only requires part-time hours.
Frequently Asked Questions (FAQs)
Can you be a part-time day trader without becoming a pattern day trader?
If you trade more than three times a week, you will be considered a pattern day trader. This comes with some advantages, such as more leverage, as well as additional regulations, like a minimum equity requirement of $25,000 in your account. Trading three times a week is considered partial trading, but it is difficult to gain the experience needed to develop effective strategies with only three trades per week.
How is taxation handled for day traders?
Day traders report their income as capital gains on Schedule D of Form 1040. You will receive a 1099 form from your broker that contains the information you need to file your taxes. As a day trader, you will not receive any preferred tax treatment; your profits will be taxed at the full income tax rate.
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Sources:
Nasdaq. “Trading Hours for the Nasdaq Stock Markets.”
Forex.com. “Trading Hours & Holidays.”
Forex.com. “Currency Pairs.”
WorldTimeZone. “World Stock Exchanges Opening Times.”
Source: https://www.thebalancemoney.com/how-to-be-a-part-time-day-trader-1031235
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