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Effective Strategies for Part-Time Forex Traders

(Guest article by Franco Shao)

Not many individuals are available to trade foreign exchange full-time. Usually investors make their buys and sells at work, during lunch time or overnight. The trouble with this type of forex trading is that forex is a variable market, so buying and selling every now and again throughout the day will result in frequently missed opportunities to purchase and sell at the best prices. This will result in a loss of money if the desired situation does not materialize before the marketplace goes against it, or there is no opportunity to enter and exit at an appealing rate. These types of lost opportunities can spell catastrophe for the part-time forex trader.

Learning Time Zones of Markets

Let’s assume that you work in your office from nine-to-five in the United States, and that you are only able to trade your foreign currencies before or after working hours. The best strategy in this situation is to pick the most active pair of securities when you are in your block of trading time. It is important to know what major forex markets are active when you sit in front of your computer screen looking at trading pairs of currencies. The table below has the time frames in which the largest foreign exchange markets in the world are active.

When you are trading in the night hours, it is good to select the New Zealand and Australian currency pairs, or you may go for the Japanese yen and Australian dollar pair. This is because when it is night-time in the USA, the Japanese, Australian and New Zealand markets are active. So it is important to know what your time frame is and what markets you should select as per your time frame. The following timetable indicates the most favorable forex markets to trade for part-time US investors.

a table listing the ideal EST times to trade the New York, Tokyo, Sydney and London forex markets for part-time US investors

Avoiding Losses by Stop-Loss Orders

If you are only able to buy and sell for a nominal time frame throughout the day, say for 60 minutes, the perfect trading strategy is to let forex trading software do the work for you. Since the currency markets are highly volatile in nature, your time schedule should have enough flexibility to avoid missing any new buying and selling opportunities. So utilizing an automated forex trading system where you can let your laptop do the right job might be the ideal strategy for you. A commonly used technique is to incorporate stop–loss orders. Using stop-losses is a safe and good safeguarding technique in case the marketplace takes an abrupt move against your position and you are not around to manually intervene.

Using a Price Action Strategy

Let’s suppose you are able to pop in and out and do some trading for just 10 minutes at any given time during the day. One technique which you can put into action in such short intervals is Price Action trading. In price action forex trading you actually examine and study the technical aspects of the forex charts of your currency pairs and do your buying and selling based on the signals of the graph or chart. Investors using a price action strategy will examine up bars (an up bar is a bar which has a greater high or greater low than the preceding bar), and down bars (a bar with smaller high or smaller low than the earlier bar). Up bars indicate an upward trend, while down bars suggest the opposite, a downward trend. You can also use other price action indicators like inside or outside bars. Selecting the chart time frame that best matches your timetable availability is crucial for success with this strategy.

Other Secrets of Forex Trading

If you are unable to trade regularly and consistently at the same time from day to day, it is still possible to make transactions in the forex market. You may not be able to keep an eye on the market during the daytime, but there are strategies you can execute to help you become a prosperous part-time currency trader. Here are a few:

Take fewer positions

When you have a solid understanding of the forex market and can shorten your list to just a few specifically selected currency pairs, you should take fewer positions and try to maintain your positions for a longer time. It is essential that you realize all the basic drivers that change the position of currency pairs and can spare enough time to truly understand the market in which you are executing your trades. An additional sensible strategy would be to set stop-loss orders with all of your forex trades to reduce the risk that the market will strike against you.

Always study the long term horizon of markets

Rather than studding the hourly or four-hourly charts of currency pairs, you should look at the shifts for the entire day or for a full week. This will certainly help you trade even if you can only look at your trading laptop or notebook just once a day.

Set trading orders without additional fees

Don’t forget to use limits, stop-loss or entry/exit orders because they will decrease the chance you miss opportunities to enter or exit positions. The majority of trading websites allow investors to set up these trading limits and rules without charging additional commissions and fees.

Don’t forget to use latest technology

Establishing auto alerts systems to your smart phone or e-mail is a great way to make sure you are kept up to date when you are busy with other things and not actively trading.

Final Remarks

The currency markets are probably the most suitable markets to deal with since it is a 24-hour market that is continuously changing. This constant changing offers a lot of opportunities to generate a profit at any time during the day. Thanks to these trading technologies and features, the foreign exchange market welcomes part-time investors and offers great opportunities for them. However, in spite of these beneficial features, it has to be stressed that the currency markets are very volatile. This makes it very risky for all traders, but especially for the parttimer. That is why it is critical for the part-time forex trader to select the most appropriate trading strategy to help mitigate the risks associated with this market.

Franco Shao

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