How to Make Trading a Profitable Side Hustle

A recent survey from revealed that 93% of Americans have a side hustle and that 51% are considering getting one. Even more revealing is the fact that many have two side hustles and as many as 10% have three.

And while many are driving for Uber and Lyft or delivering takeout orders for Door Dash, in this article I show you how you can use short-term trading techniques as a side hustle without leaving the comfort of your house.

Long-Term Investing

My definition of long-term investing is literally that I will be an investor as long as my health and my mental faculties allow me to do so.

The traditional view, however, can be boiled down to the notion that you research a company thoroughly and that you purchase the shares with the goal of holding onto the investment for an indefinite period of time. This is especially applicable to retirement funds, such as those in 401k plans and Individual Retirement Accounts (IRAs).

There is a great bit of nuance associated with long-term investing, but much of it has to do with the ability of individual companies to earn enough money to pay dividends as well as to expand the business over time.

As a result, long-term investors tend to gravitate to blue-chip stocks in businesses which over time have proven to be able to survive through both good and bad times. The usual suspects feature sectors such as energy, utilities, and in some cases mature technology stocks such as Texas Instruments (NYSE: TXN) and Microsoft (NSDQ: MSFT), which offer both dividends as well as the potential for growth over time.

On the other hand, trading is all about analyzing markets and using data for short term risk taking in the stock market.

For many this is a profession, but for long-term investors, it can be a profitable side hustle, especially when you’re looking for a little extra cash for recreation or even paying the bills.

Trading Is a Different Animal

Trading differs from investing as it involves the analysis of price charts combined with the timing of entry and exit into a position. Moreover, trading involves the application of a specific and often precise time frame to the allocation of funds into an asset.

For example, a day trader is looking to make money in a short period of time which can range from seconds, to minutes and perhaps hours. But at the end of the day, all positions are closed.

Intermediate-term trading, on the other hand, is all about trend following for periods of time which range from days to week, and in some cases months. In order to maximize profit opportunities via this method, one applies price chart analysis which incorporate indicators which deliver entry and exit signals.

Furthermore, traders set price targets which when reached signal whether a portion of the position should be partially reduced (taking partial profits) or even closed out. By the same token, traders will set loss limits and use sell stops. A commonly used sell stop area for those trading for the intermediate term is that of setting a sell stop if the price of a stock falls 5-8% from the most recent high price.

Focus on the Present

We’ve been in a bear market since December 2021. And the truth is that both traders and investors have taken their lumps. But that doesn’t mean that you can’t capitalize on short term trading opportunities when they appear.

Chances are that you’ve been holding on to some of your stocks in hopes that they will bounce back. If you’ve done this, as I have, it’s because even though the stock’s price has fallen, the company continues to make money, and to offer positive guidance. Perhaps the best way to see if you’re right is to see what the shares do when the market bounces.

If a stock you own bounces aggressively when the market rallies, even if it’s a short-term rally, that means that there are investors out there who share your positive view on the company and that when the market turns, the odds will favor your stock bouncing back.

And while being patient will pay off in your long term portfolio, it’s a good idea to have a trading plan in place which allows you to capitalize on short term trading opportunities – the side hustle.

Use ETFs for Side Hustle Trading

As I noted above, price charts are the key to success when trading for the short to intermediate term. Moreover, rather than using individual stocks, exchange-traded funds (ETFs) are the simplest way to trade in the short term.

That’s because they are purely influenced by the trend. As a result, you don’t have to research a company’s products or its management. You’re just trading the trend.

In this past article, I described a set of indicators including moving averages and price volatility bands. In this article, I want to focus on momentum and money flow indicators. I recommend reviewing the past article along with this one in order to get the full picture.

I like to use the ProShares Ultra S&P 500 ETF (SSO) because it’s a pure play on the trend of the S&P 500 (SPX) index. In addition, it’s 2X leveraged, which means that when the S & P 500 rises 1%, the ETF rises 2%. On the other hand, when SPX falls 2%, SSO falls at 2X the rate, so special care is needed to manage the risk of losses.

Here are my favorite indicators:

  • Relate Strength Index (RSI): This indicator tells me when SSO is overbought (reading at 70 or above) and oversold (reading at 30 or below)
  • Rate of Change (ROC): Rising ROC tells me the current trend – up or down- is accelerating and falling ROC shows the trend is reversing.
  • Accumulation Distribution Indicator (ADI): Falling ADI is a sign that short sellers have the upper hand and that prices will likely continue to fall
  • On Balance Volume (OBV): Rising OBV means that buyers are coming in while falling OBV illustrates sellers are bailing out
  • Volume by Price (VBP): These big bars on the left side of the chart are signs of buyer and seller interest. The bigger the bar, the more money that is at stake at that price. When the price rises above a big bar, it means that the buyers are in charge. The opposite is true when price falls below a big bar.

Putting it All Together

We’ve had two bear market rallies lately, one in May and one which is unfolding as we speak in June. Both provided opportunities for short term trades.

In each case when the market bottomed, RSI hit 30, ROC changed direction, and ADI turned higher. That’s your entry point.

More important, these bullish changes reverse as the rally has failed. That’s your exit point.

In other words, by watching crucial indicator trend changes anyone could have made profitable trades by using SSO during these bear market rallies.

Of course, bull markets where stock prices trend higher for weeks to months offer better opportunities to make money. But the reality is that sometimes short to intermediate term trading is all you can do as you wait for the next bull market.

And as you wait, you can make good use of your side hustle.

Editor’s Note: This could be the year that marks the biggest change in financial history…when crypto finally goes mainstream. That’s the view of my colleague, Jimmy Butts.

Jimmy Butts is chief investment strategist of the Capital Wealth Letter, one of America’s most trusted financial research advisories. Jimmy has pinpointed the three best ways for investors to cash in on crypto’s inevitable rise. Click here to learn more.