If you want to trade alongside your profession, you should either prepare yourself for one or two trades per day or pursue strategies other than day trading with day trading software. In fact, trading is also recommendable for many interested parties in addition to the job. A certain financial stability offers room for development to become a professional trader, while trading as a main job is often a challenge that is not for everyone. Why?
There is a big difference between whether you live from the risk capital that you have to earn every day in stock exchange trading or whether this capital is just an extra income from which you could possibly afford a vacation. The emotional connection to retail is all the stronger. This in turn promotes the feeling of having to earn something at any price and thus the so-called overtrading.
With overtrading, the trader sees opportunities everywhere on the markets. Especially where there are actually none. For example, the trader talks himself into thinking that an outbreak could occur, even though there is a clear sideways phase. He trades and trades and doesn't deserve anything.
Trading first as a hobby can help to avoid this feeling. The less time available that another profession brings with it, at the same time there is a lower trading frequency. In the following we want to give some suggestions on how working traders could proceed.
The Hobby Swing Trader
As is well known, good planning is important in trading. Anyone who analyzes and plans meticulously has less to do in the course of the trade and can even be employed in other ways. A successful trader once said: "Trading has to be like professional sport. Training or preparation is everything, while the actual trading is easy and without effort."
A hobby swing trader has to take a few hours of time to prepare his trades. He can do this either in the evening or at the weekend. Swing trading means that certain swings, or medium-term trends, if you like, are exploited. The advantage of planning on weekends is that there is no trading. The trader is not irritated by price movements and published news.
Swings can be defined in different ways. It can be bigger trends, or just short-term movements. For the retailer who only analyzes at the weekend, the somewhat larger trends would be recommended, such as based on the 4-hour chart, see below.
However, for the retailer who plans at the weekend, swings will not do so easy to identify. Like every trader, he has to set certain rules that generate a trading signal and possibly react to it during the course of the week. Here's how he could go about it:
- Define setups that generate a buy or sell signal
- Check the week for important political and economic news
- Set risk management rules
- Define times when trading
Trading according to plan
Having a plan is not only relevant in trading. But it is particularly useful here, also for reasons of time management. The following is an example of weekend planning. This comprises approximately 3-4 hours, which however can be spread over the days of Saturday and Sunday.
1.5 hours studying the current news situation on the financial markets
This is useful in order to avoid surprises. Especially those who trade currencies should keep an eye on monetary policy decisions such as interest rates. The market technician does not necessarily have to react to this if he is doing a good risk management, but if an interest rate hike is increasingly expected, one should consider whether one might initially suspend trading.
When defining the setups, the trader's actual trading strategy is used. The trader specifically searches for setups that speak for trading signals. He works according to predefined rules. Eg:
A buy signal is given if
- an SKS formation exists on a 4 hour basis
- A relevant resistance or support is broken and a retest of the outbreak level occurs
The exit occurs when
- The RSI indicator shows weakness in the trend
Set risk management rules
The risk management rules are primarily the defined stops or the use of capital per trade. The dealer either always has fixed values, or he makes individual decisions. For example, he can put his stop loss order just below the breakout level or he has a fixed value of 50 pts depending on the traded value. With binary options, the part with the stop loss is omitted. In many cases, the exit cannot be defined either, since the option has a fixed term. The trader only has to determine the value of the stake and the term.
Define trading hours
This point strongly depends on it what time horizon you are trading in and how exactly you have to define it. For example, if the trader does not trade hourly charts, but maybe even on a weekly basis, he can buy or sell in the evening, provided his setup has generated a signal for the day. It is not so important then whether he missed a few points in profit, because the swings that he trades last for several days to weeks.
On the other hand, a trader who trades a 4 hour chart has to do exactly as get in as possible because the short-term swings can be very short. It would therefore almost be recommended if entry was missed throughout the day not to take any trade and wait for the next one. But every evening there are always opportunities, because you already have a plan.
How can you spend a minute?
Conclusion- Hobby trading can also be fun
The upper one Example makes it clear that trading is not necessarily an obsession to be successful in it. Even more, the successful traders are more the ones who see the whole thing rather loosely and thus reach a certain emotional distance from the trade.
Click here for our day trading recommendations.