Trading around a Day Job

Whilst helping my former forex trading mentor at a recent World Money Show (London) ‘Divergence’ Trading Workshop, the issue of trading around a Day Job came up.  Not surprisingly, most people learning to trade have a day job.  Some wish to generate additional income on top of their annual salary and others want to eventually replace their current income with an income from trading the financial markets.  We always recommend that aspiring traders in the latter category should NOT give up their day job until they have an extended track record of profitability and sufficient trading capital to be able to generate a decent income, equal to or better than their current salary.  So how does one trade and still maintain a day job?  Firstly, the most common mistake is to try and trade the markets on lower time frames (5  and 15 minutes), snatched in a short period during a busy day or before the main markets open, or during the evening when things may be a little quieter, this inevitably will lead to losses often because those trades are taken out of context with the higher time frames and in the day to day ‘noise’ of the markets.

A better and far less stressful approach is to move up several time frames, so that the Weekly and Daily charts provide the context and the 4hr is used for your entries.

This approach will remove most of the misleading noise from your decision making and steer you towards swing trading.  The Daily and 4hr candles can provide a better reflection of true market sentiment.  Should you have the time then the 1hr chart can be used for tighter entries but is not essential.

You will have more time to consider and plan your trades, entries, stops, targets, risk : reward etc, and you should by the very nature of moving up time frames take less trades.  Over trading is a key factor in depleting ones trading capital.  You will also be in trades for longer and should be able to benefit from any sustained trends.

The downside is that you will need a little more trading capital in order to manage your risk properly as your stops will inevitably be larger.  But this in itself has benefits because it should prevent a lot of failed trades due to whipsawing and stop hunting, normally seen to take out the weak traders on lower time frames.  A good tip can be to wait until the US markets have closed around 10pm UK time and have a look at the Daily candle for clues.  Also you can use Limit Orders which can be placed should price reach a point where you wish to enter the market.

So why not give it a try and de-stress yourself.

Top Trading Tip:  Use Higher time frames to achieve a better context in which to trade and to allow you more time to think, plan and enter trades.  Do lots of your analysis over the weekend or in the evening.  Use multi-time frame analysis, horizontal support and resistance, trend lines, key fib levels, price action, candle stick patterns and any other strategy you might employ and try to trade less by using higher time frames but stay in longer.  Less is often more when it comes to trading.  This should reduce your stress and allow you to concentrate on your day job too and lead to greater profits for those with a busy day job.