𝐓𝐡𝐞 𝐝𝐨𝐰𝐧𝐬𝐢𝐝𝐞 𝐨𝐟 𝐩𝐚𝐫𝐭-𝐭𝐢𝐦𝐞 𝐭𝐫𝐚𝐝𝐢𝐧𝐠 (𝐭𝐡𝐞 𝐭𝐫𝐮𝐭𝐡 𝐫𝐞𝐯𝐞𝐚𝐥𝐞𝐝)
There’s a downside to part-time trading that you must know and it’s this…
It’s difficult to generate a consistent income from part-time trading.
That’s because you’re trading off the higher timeframes which offers less trading opportunities compared to a short-term trader.
This means it takes a longer for the law of large numbers to work in your favour.
Confused?
No worries, I’ll explain…
Imagine you have a special coin in your hand…
- If it comes up head, you win $2
- If it comes up tail, you lose $1
But here’s the catch, you can only toss your coin once a day.
Do you think you’ll make money every single day?
Of course not.
Why?
Because in the short run, your coin toss results are random — you could get tails many times in a row (and thus have many losing days in a row).
Now, what if you can toss your coin 1,000 times per day, how will the results change?
Well, you’ll get close to 50% heads and 50% tails after 1,000 tosses — which means you’re guaranteed to make money every day because your edge can play out within a short period of time.
And this concept is the same for trading!
If you have an edge in the markets and you have a higher frequency of trades, your edge can play out within a shorter period of time.
If you have a lower frequency of trades (in the case of part-time trading), it takes a longer time for your edge to play out.
Although this seems like a bad thing for a part-time trader, remember…
You’ll have the ability to compound your returns for a long time, have less stress, and have the freedom to do the things you love.
Is this worth it?
Only you can decide for yourself.
