Strategies for Part-Time Forex Traders.
Nick Lioudis is a writer, multimedia professional, consultant, and content manager for Bread. He has also spent 10+ years as a journalist.
Updated June 02, 2022.
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Reviewed by Gordon Scott.
Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of CMT Association.
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Marcus Reeves is a writer, publisher, and journalist whose business and pop culture writings have appeared in several prominent publications, including The New York Times, The Washington Post, Rolling Stone, and the San Francisco Chronicle. He is an adjunct instructor of writing at New York University.
Very few people are available to trade forex full time. Traders who have to make their trades at work, lunch, or night find that with such a fluid market, trading sporadically throughout a small portion of the day creates missed opportunities to buy or sell. These missed opportunities can spell disaster for the part-time trader.
The risk of missed opportunities notwithstanding, there are strategies that can work based on a part-time schedule. For example, those who trade at night might be limited to the types of currencies they trade based on volumes during the 24-hour cycle. These night traders should employ a strategy of trading specific currency pairs that are most active overnight.
An example would be trading the Australian dollar (AUD) / Japanese yen (JPY) pair or the New Zealand dollar (NZD)/JPY or AUD pair. It is important to analyze the correlation between currencies when choosing a pair, as having time during the day to study the market and implement trades can lead to a successful strategy.
The main problem as a part-time trader is—you guessed it—time constraints. Here are some strategies for trading part-time when you have an inconsistent schedule.
Key Takeaways.
Forex markets trade around the clock, 24/7. Unless you're a professional trader, you simply don't have the manpower or time to keep your eyes always on the market. Fortunately, several basic strategies exist to allow part-time traders to stay active and protect their positions even when they are away from their screens or even asleep. Stop-loss orders and automated trade entry from electronic trading platforms are just two ways to trade when you're a part-timer.
Know Your Forex Markets.
Assuming you work nine to five in the U.S., you could trade before or after work. The best trading strategy in those time blocks is to pick the most active currency pairs (those with the most price action). Knowing what times the major currency markets are open will aid in choosing major pairs.
New York is open from 8:00 a.m. to 5:00 p.m. EST Tokyo is open from 7:00 p.m. to 4:00 a.m. EST Sydney is open from 5:00 p.m. to 2:00 a.m. EST London is open from 3:00 a.m. to 12:00 noon EST.
The markets in Japan and Europe (open 2:00 a.m.–11:00 a.m.) are in full swing so part-time traders can choose major currency pairs. These include the EUR/JPY pair or the EUR/ CHF pair for major currencies or pairs that involve the Hong Kong dollar (HKD) or Singapore dollar (SGD).
The AUD/JPY pair might also work well for part-time traders available during the 5 p.m. to midnight timeframe. While it is crucial to understand the best currency pairs that fit your schedule, before placing any bets the trader needs to conduct further analysis on these pairs and the fundamentals of each currency.
Stop-Loss Orders in Forex Trading.
The best strategy for part-time traders may be to let your computer be your "trading partner." The ability to employ a trading program where you can let the information technology work for you could be beneficial, as the forex market is so fluid and difficult to monitor. Another common strategy is to implement stop-loss orders, which means that if the market takes a sudden move against your position, your money is protected.
Price Action in Forex.
There is also a strategy for part-time traders who pop in and out of work (10 minutes at a time). These brief but frequent trading periods may lend themselves to implementing a price action trading strategy. Price action trading means analyzing the technicals or charts of the currency pair to inform trades. Traders can analyze up bars (a bar that has a higher high or higher low than the previous bar) and look at down bars (a bar with a lower high or lower low than the previous).
Up bars signal an uptrend while down bars signal a downtrend, while other price action indicators may be inside or outside bars. The key to success with this strategy is trading off of a chart timeframe that best meets your schedule.
Other Forex Trading Strategies.
These strategies may also serve you well as a part-time forex trader:
Take fewer positions and hold for days. It is critical that you understand the drivers of your currency pairs and have taken the time to really understand your market. Therefore, after studying the market and narrowing down particular chosen currency pairs, selecting a few positions and holding them for a longer period of time is a prudent strategy for part-timers. Another wise strategy is to put in stop-loss orders with all your trades to minimize any losses if the market moves against you. Look at long-term trends. There is value in looking at longer-term trends (daily/weekly) instead of looking at hourly or even four-hour charts. This will allow you to trade while looking at your computer only once a day. Set up trading orders. Setting limit, stop-loss, or other entry/exit orders can ensure you do not miss opportunities to enter or exit positions. Most trading platforms allow for these orders with no additional fees. Use technology! Set up automated alerts to your mobile phone or email to keep you informed of currency price movements while you are not actively trading.
Can Forex Trading Make You Rich?
Being a regular retail forex trader is a difficult path to becoming rich. Currencies are impacted by many factors and so it can be difficult to predict the movement of a currency, particularly when surprise events occur. In addition, the forex market is not centralized and with that comes its own risks. A significant amount of information is needed to trade forex successfully and that type of information is not readily available to the average forex trader. Now, if you are a large financial institution or investment fund, then the possibility of becoming rich through forex trading exists.
What Is FX and How Does It Work?
"FX" refers to foreign exchange and specifically foreign exchange trading. Because the world is interconnected and commerce spans across all nations, foreign exchange is the most liquid and largest financial market in the world. FX refers to buying and selling currencies, which is done through currency pairs.
How Much Do Foreign Exchange Traders Make?
The amount that a foreign exchange trader makes will vary depending on how much trading the trader does, the institution that they work at, if they trade alone, and how successful they are. The average salary for an FX trader is $108,750. The salary ranges from $21,025 to $558,741.
The Bottom Line.
The forex market is desirable for part-time traders because it runs for 24 hours and is constantly in flux, providing ample opportunities to make profits at any point in the day.
However, the forex market is very volatile. This makes it risky for all traders, particularly the part-time trader if the proper strategy is not implemented.
Strategies such as trading specific currency pairs that are at play during the times of day you can trade, looking at longer timeframes, implementing price action methods, and employing technology will contribute to the success of part-time forex traders. Risk tolerance, leverage, and time horizon (from hourly to weekly) must also be taken into account for any trader's broader strategy.
In sum, these elements are an important part of any trading strategy, whether the focus is on short- or long-term gains.