There was a time when day trading was associated with market experts only. Nowadays many salaried people are active trading in day trading who indulge in other fields, but they do not give up their regular job for day trading. Some people consider day trading as a part-time work for income and hardly spend 3-4 hours trading in day trading without affecting their normal jobs.
Part-time traders can trade every day during the best times of the trading session with the best trading opportunities. There are some specific timings when a part-time day trader can utilize the opportunity to earn the greatest possible returns. It is around the opening timing of 9:30 a.m. and closing timing at 4 p.m. of the stock market.
Day traders can use the margin trading facility from stockbrokers and leverage their positions in the stock market with their limited funds. Margin trade meaning is a person can buy more stocks than he/she can afford with the available money. This facility is good for salaried persons also as they are limited to their monthly salary.
Is Day Trading a viable option for part-time income?
The simple answer is yes but with trading strategies. Half a million Indian investors are involved in day trading to make a living. Day traders have as much work as a regular job, thus salaried persons cannot devote much time on a daily basis. Thus, they use their ability to make logical judgements in a limited time with their vast knowledge of the stock market. However, a firm mental state is necessary to maintain the stress of job and day trading.
- The risk is minimal in the case of options trading. Options allow investors to buy or sell the underlying security at its pre-determined prices. Therefore, it increases the returns and lowers the risk in different market conditions. Salaried traders can trade options to protect their limited funds.
- Options trading does not require a huge upfront financial commitment in comparison to stock trading. The purchasing price of an option including trading commission will be affordable for a salaried person than purchasing shares outright.
- There are limited losses for options buyers. When you invest in options, your incorrect assumptions about the direction of stocks will not magnify your losses. It will be limited to whatever premium and trading account fees you paid.
There are a lot of benefits over the risks of options trading. However, risk is inherent in the stock market that cannot be avoided completely. It is important to select the right options. If the trade goes well, the potential profit is going to be huge. Here are some guidelines to decide on types of options to trade:
Options trading can be more profitable if you consider market volatility first. If the stock market volatility is not very high, then buying call options is a good idea, because it will be relatively cheap.
- A long call
When you buy options with the long possible expiration, it means your trade has enough time to work. On the other hand, if you are a seller or writer, choose the shortest possible expiration. It will limit your liability.
- Trade prior to the earnings report
Corporate restructurings and recurring events like earnings announcements are the events when traders have an opportunity to cash in.
The Bottom Line
Part-time trading can work well if you find out the best times of the day with the best trading opportunities and trade regularly. Remember the better timing for trade may depend on your trading strategy. Learning the skills of day trading is like a full-time job, but once you get mastery of your strategy, day trading will require part-time hours.