Regular readers of my blog, or anybody who has read my trading goals, know that I have a day job and trade around it. I am what is commonly known as a part-time trader. I received an e-mail about the topic yesterday, asking whether I'd be better off "going from part-time to full-time".
Opinions vary on whether part-time traders can be successful. Two prominent trading bloggers take opposing views. Dave Landry believes part-time trading is a good way to not "micro-manage trades", while Charles Kirk doesn't think it's likely to trade successfully on a part-time basis. Mr. Kirk wrote:
When I made a couple of trades this week (both of which turned out to be unsuccessful because I was late to the party), I'm reminded of a lesson that I tend to forget - you can't trade stocks well on a part-time basis. At least I'm not smart enough to. Perhaps you're a bit more focused than I am.
Don't let Mr. Kirk fool you . . . the dude is uber-smart. I don't go a day without reading his site. However, I have to respectully disagree with his statement. Not only do I think one can make big gains trading part-time, I believe it can be better for certain types of traders. Most notably, for swing traders who hold stocks anywhere from a few days to a few months.
My greatest battle as a swing trader has been, as Mr. Landry would say, not micro-managing my trades. While I do work full-time, I have access to a computer at almost all hours of the day, and can view streaming real time quotes. However, and some of you may think I'm crazy for this, I don't look at them. I've learned to turn off the quotes, and I'm all the better for it. In my opinion, one of the worst things a swing trader can do is watch every freakin' tick. Those little buggers can drive a swing trader crazy. I can't count the number of times I've pulled out of a trade based on the "noise" of the ticks. Of course, most of the time the ticks were just that, noise, and my trades would go exactly as I had expected when I made them. Once I shut off the streaming quotes and let my stops work for me, my trading results went parabolic.
Now I only check my watchlists and current positions at the open, one hour into the trading day, at lunch, and during the last half hour or so. There are specific reasons for each of those times. The most important quotes for my style of trading print at the open and the close. The first hour (and first half hour) point tells me if the open is for real. Finally, I find that lunch is a good time to get "bargain prices" for entry points, as the market tends to soften at this time.
What do I mean by letting my stops work for me? When I place a stop, there is a well reasoned purpose for doing so. I don't place stops by setting some arbitrary percentage. My stops are placed by taking into account support, resistance, the stock's volatility and moving averages. They are designed to allow for noise and only trigger if there is something fundamentally wrong with my trading idea. Therefore, there is absolutely no reason for me to watch every tick. All I need to do is let the stops do their job.
For a swing trader like me, trading full-time would not help, and could actually hurt my bottom line. Of course, you must know your time frame, and a daytrader would have to trade full- time. But for swing trader, part-time trading can be a great fit. Besided the methodological benefits, I also gain by building my trading account while still having another dependable stream of income. It's comforting to know that my next trade will have no effect on my ability to pay my mortgage or buy my kid's diapers. If that wasn't the case, I might need to buy some of those diapers for myself!
How do I measure the tone of the market, manage my watchlists and scan for new stocks? Surprisingly, it only takes me 1-2 hours per day (usually after my daughter falls asleep), after which I feel I know everything I need to be ready for the next day. In Part II, I'll go over my nightly routine.
I welcome questions and comments on this post. Feel free to post a comment here or send me an e-mail.