Forex trading is a great way to supplement your income. Even if you work a full or part-time job, forex trading can be a valuable add on to your income. Here we'll share a few tips on getting started in this potentially high profit market when you have less time to invest.
First, find the right pairs to trade. The key is to trade in currency pairs that have high liquidity. Next, set up an automated trading strategy that will require little portfolio monitoring. Then, be sure to stick to your guns and be patient. The forex market is volatile, but the disciplined trader can find success.
Forex trading occurs 24 hours a day, but its best to trade during peak hours. Peak hours on popular currency pairs means they have high liquidity. This is your ability to sell your position which is a very valuable place to be.
Assuming you work a 9-5 job, you will be available to trade at odd hours so pick a currency pair that is at peak trade volume when you are available. Typically the best options to choose are trading US currency against a variety of foreign currencies. Even veteran traders tend to stick to this strategy.
The primary currency pairs are: USD/EUR, USD/JPY, USD/GBP, USD/CHF, USD/CAD and USD/AUD.
Once you have a little more experience another set of currency pairs with high liquidity are the Euro versus other currencies: EUR/GPB, EUR/JPY and EUR/CHF.
As a part-time forex trader you are going to have very limited time to trade. Therefore, the best currency pair to trade is USD/EUR. This pair has the highest trade volume and the most information available on its value at any given time. Do not trade two foreign currencies as this will take much more time and effort.
A great way for part-time traders to get started is with an automated trading program. These programs come in all shapes and sizes. Automation programs vary in levels of complexity and automation. Some can do things like monitor prices in real time, place market orders and recognize profitable spreads. Most will then automatically send buy or sell orders.
However, even if the program recognizes profitability, there is no guarantee the order will be filled at the price expected. Be prepared for price slippage and plan accordingly. The best program for a part-time beginner may be one with a very high amount of automation and little oversight needed. You would simply let the software make the decisions for you.
The software will never get worried or make a mistake. It will execute your orders with ruthless efficiency and cold calculated logic. This is a major benefit to new traders since the volatility of the market can lead to poor decision making.
If you decide not to go with an automated system then discipline and self-control will be your best weapons against new trader mistakes. They are essential for success. It is also advisable to take profits when they are there rather than trying to anticipate larger spreads.
Often currency valuation is influenced by many complex issues that a part-time forex trader may not be aware of, it is generally better to take profits when you can. Traders can use what are called trailing stop and stop market orders to protect themselves from market reversals, but nothing is certain in trading and there are no guarantees orders will be filled at the anticipated price.
If you have little to no experience, start small. Open a mini forex account first and you can gain valuable experience you need without risking as much. A mini account allows the control of up to 10,000 currency units while a standard account allows the control of 100,000 units but will have a much higher minimum deposit.
Be careful with leverage. Leverage is like borrowed money. It allows traders to buy currency lots on margin. Potential profits and losses are much higher with leverage. Finally, never risk more money than you can lose. Particularly with leverage, a rule of thumb is to never leverage more than 2% of your total funds.
To be successful in part-time forex trading, you must be disciplined and patient. There is no guarantee that you will make a profit. For beginners it is best to start with an automated trading system that can be dispassionate where you may not be. Follow the steps above and your chances of being profitable will greatly increase.