Trading in the forex market is different from how you trade in the traditional market. You can buy your commodities both online and offline without any form of training. If you must be engaged in trading fiat currencies then you need a demo account.
A demo or practice account is where you learn about forex trading without putting in your money. There is no risk attached when using a demo account compared to when going live. Once you get a demo account from a forex broker, you need to learn the strategies and technical analysis involved in forex trading to prevent ‘blowing your money in the air.
In this article, we’ll teach you the ways to know you are ready to move from a demo account to live. This will help you in your mission to make profits from your trading.
5 Ways to Know You are Ready to Move from Demo Account to Live Trading
1. You can make profits consistently
Making consistent profits and winning all the time isn’t the same.
There ain’t a single renowned forex trader who can say that he hasn’t lost a single trade in his entire trading career. Given the market’s ever-changing market conditions, losing is part of the battle.
So if you’ve lost a trade or two this week, don’t beat yourself up. Rather, focus on honing your skills in finding high-probability setups with decent reward-to-risk ratios and come up with strategies that will help you minimize your losses and maximize your wins.
Make sure you also monitor your profitability on your demo account each month. That way, you’ll know if you’re on the right track so that it will be easier for you to see what you need to work on.
2. You have clear risk management rules that you stick to all the time
They say that 50% of your success in trading is determined by your ability to find good setups. The other 50% rests on proper risk management.
With that said, having a well-thought-out set of risk management rules is also a must-have on my checklist.
There will always be times when the market goes wild, making you doubt your analysis and trading skills.
During these instances which test your mental toughness, your risk management plan may be the only thing that could protect your account.
Before you start to think about going live, you should make sure you’ve got a well-defined set of rules which tell you when you’ve lost enough or you’ve been trading too much, or else, you’ll just wreck yo’ self.
If you haven’t outlined your risk management rules yet, you can start by including percentage risk, the maximum drawdown you can tolerate, and when to stop trading after a series of losses in your trading journal.
3. You don’t lose your cool when your trade is losing
Do you still panic when your trade is going against you? If you do, you may want to re-think investing your hard-earned money.
I know, I know, it’s no easy task to keep your cool when you see that you’re losing money. So what should you do? Make a detailed trading plan and follow it!
By having a plan to focus on, you will be able to think clearly and evaluate what has changed in your trade since you saw the setup or if the fundamentals have shifted to help you decide whether to hold on or not.
4. You don’t take your losses too hard
If you do wind up with a dent in your account, you don’t take it too hard on yourself no matter how small or huge the loss is. Instead, you keep your cool and identify what went wrong and which technical and fundamental factors affected your trade.
Bear in mind that such level-headedness is usually achieved, not only when you plan your trades properly and calculate your risk beforehand, but after consistently doing it for a while.
There’s no substitution to achieve success other than deliberate practice and gaining experience.
5. You are completely comfortable with your broker and trading platform
Before you open a live account and risk actual money on your trades, you should know the ins and outs of your trading platform very well. You don’t want to suddenly realize that you don’t know how to exit a trade just when you’re about to, right?
Aside from that, you should be familiar with slippage and your broker’s usual pip spreads so that you’d be able to take these into account when setting orders.
This is why we encourage you to practice with a demo account from the same broker you plan to open a live account with.
Last but certainly not least, you should be able to contact your broker easily in case anything goes wrong with your account. You’ll be entrusting them with your hard-earned money after all.
You must have perfected all the signs listed here, note that this is not all you need to be successful in forex trading. Another important thing to understand is the psychological factors that come to play. This is the right mindset you need for forex trading.
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