How to Succeed with Part-Time Trading
Before we jump into how to be successful with part-time trading, a note on something I hold close to my heart….
People MUST see how urgent it is that we take better care of our marine life and oceans. A horrific image of a pilot whale that had its tail mostly chopped off by a boat propeller off the coast of the Canary Islands has been circling the internet. It should be a wake up call.
Our marine life and oceans are suffering due to our carelessness and greed — we MUST CHANGE or face catastrophic consequences all within the next few years.
Was this whale hit by a ship, a ferry or a pleasure boat? We will never know, but we have seen too many boats traveling at high speed through sensitive wildlife corridors.
Only three people were there to hear the calls of pain and fear of this young whale. The photographer, the marine biologist and the wildlife veterinarian who were called to the scene were not able to help an animal with such a severe injury.
All they could do was pull it out of the water and, with the kind of sorrow that can only be understood by people with enough empathy to do what they had to do, sedated it until it died.
Sparing more unnecessary suffering to an animal with no chance of recovery was what they had to do.
What the rest of us need to do is to become more engaged and care for our wildlife, oceans and limits is very difficult. But it all begins with awareness and public pressure; the kind that demands that the voices of millions of people are heard. As angry and sad as this makes us, we are also extremely motivated to do something about it.
I hope our Save the Reef documentary inspires people around the world to treat our marine ecosystem better. And to take action and push for laws that prevent this kind of tragedy from happening in the future.
And now to put my teacher hat back on…
How to Succeed with Part-Time Trading
Whether you’re trading part-time or full-time, you want to work smarter, not harder. Here are some of my best tips for how to make it work:
#1 Most Common Stock Chart Patterns
Even the most accomplished traders usually only trade a few key patterns. If it ain’t broke, don’t fix it, right? Here are two of my favorite stock chart patterns:
The Supernova: This is by far my favorite chart pattern. Let’s break it down:
There’s an explosion in the stock price, then it peaks before it falls. This creates opportunities to sell both on the way up and on the way down. A supernova could be caused by any number of catalysts — world events, earnings, general hype.
And because they’re characterized by huge volatility and liquidity, supernovas can be easy to buy and sell short. That’s part of why I love this setup so much … There’s the opportunity to take advantage of big price swings, and there are usually enough people trading that it’s easier to get the entry and exit points you set in your trading plan.
The Stair Stepper: Here’s another one of my go-to patterns: the stair stepper. This is where a stock has regular bouts of rising and falling in price with plateaus in between. When you look at the chart over time, it vaguely resembles a staircase, either ascending or descending.
Once the stair pattern is established it becomes a self-continuing cycle — traders tend to buy in during the steps up and short-sell on the steps down. Of course, I urge a cautious approach for this pattern when the steps become too steep because, as with a real staircase, that’s when you can fall flat on your face.
For more on these stock patterns, check out my guide to penny stocks.
#2 Key Technical Indicators
There are so many technical analysis tools out there that it can be overwhelming. Don’t be tempted to just forget about them. I get it — your time is limited as a part-time trader and you don’t have time for that, right?
Wrong! It’s important to get to know key technical indicators, but you don’t have to use them all.
Rather than trying to master all of them, stick to a few key technical indicators and get really intimate with them. Here are a few key technical indicators that I often use:
SMA: Short for simple moving average, this indicator shows the daily average over a period of days. You can set it for any period, but 20-day, 50-day, and 200-day averages are common. The SMA can help give you an idea of a stock’s support and resistance levels with a more balanced number because it includes fluctuations over time.
MACD: The moving average convergence/divergence indicator follows trends and shows you the relationship between two types of moving averages. The goal with MACD is to find fast-moving gains that you can use in short-term trading.
To calculate it, subtract the exponential moving average (EMA) from a 12-period EMA to get the MACD line. A line is then placed on top of the MACD line, representing the 9-day EMA. Of course, a stock screener and charting software can do this for you automatically.
RSI: The relative strength index is an indicator that can help you compare gains and losses so that you can figure out which are greater and by how much. To calculate the RSI, you set a time period — the most common is 14 days.
Say that a stock is experiencing seemingly erratic gains and losses. By running the RSI, you can get a better handle on whether the losses or gains are dominant. The RSI goes on a scale from 0-100, with 30 and 70 respectively seen as the underbought and overbought levels. Lots of traders use these lines as indicators of breakouts, which can work.
Moreover, the RSI can confirm a trend and its strength. If the trend appears to be weak, it can be a sign of danger, since you don’t know what it might do next. A strong trend generally gives a few signals before reversing.
Your own experience: Don’t just read about these indicators and then rely solely on them. Time will be your best teacher, and you’ll learn which indicators you like best and which ones are the most informative for your trading style. I strongly urge you to maintain a trading journal to track all the details of your trades.
Remember to include which indicators played into your decision to trade or not trade. Over time, you may see trends emerge in your own trading, where certain indicators prove more useful than others.
#3 Mental Preparation
Trading isn’t just about numbers. It’s also about your state of mind.
Even as a part-time trader, you need to devote yourself wholeheartedly to trading. There’s a big difference between trading part-time and trading casually.
Part-time trading on a whim or because you feel like it generally isn’t a solid long-term strategy. Without structure, you can struggle to improve. Your wins will likely be flukes if you don’t devote yourself to true planning and studying the market’s mechanics.
So how do you get into the right mindset? I suggest sticking to a routine or schedule. Maybe it’s a few hours before work each morning, or maybe you set aside time to research every night.
You may be trading part-time, but that’s no excuse to be a part-timer mentally. Take the time to do it right.
#4 Use News Catalysts
Catalysts have the power to move stock prices, so be sure to use them along with your chart research and technical analysis.
A news catalyst can be literally any type of news, directly or indirectly related to the company, that has the potential to move stock prices.
Direct news catalysts: Some news catalysts are directly related to the company in question.
One of the biggest news catalysts is earnings winners (or losers). After the close of each quarter, public companies must release earnings reports. How the company’s earnings stack up to the same quarter last year as well as analyst projections can have a big impact on the stock price.
Earnings that exceed expectations can cause swift and rapid price increases. The reverse can happen when the company doesn’t meet expectations.
A few other examples of catalysts directly relating to companies might include a big contract or partnership or a big new investor. It’s not always certain how much of an effect these things will have on the stock price.
Indirect news catalysts: Sometimes, the news that moves a stock price isn’t directly related to the company or stock in question.
For example, a stock’s value could go up or down based on sympathy plays.
Say that another company in the same sector had a big news catalyst. If it raises the price of a stock — even though it has nothing to do with another company in the same sector — that company’s stock could rise too. All because it’s associated with the other stock by sector.
Here’s another example: A change in government policy can affect a stock’s price. Recently the Farm Bill was passed in the U.S., making it legal to produce hemp on an industrial level.
This news didn’t directly relate to any one company, but it had an effect on all companies involved in the production of CBD. The policy change meant the potential for a much larger consumer base and audience. This caused some rapid spikes in stock prices.
Bottom line: Always keep track of the news, both company-related news regarding the stocks on your watchlist and the world news at large. You never know when something might act as a news catalyst and kick a stock price into a trend.
And you have just one last tip to go…
I’ll share that with you tomorrow along with a few other pointers before we move onto our next topic.
You’re almost at the finish line!
— Tim Sykes
Editor, Penny Stock Millionaires