So, you did amazing on your demo account. Great! And now you want to take it a notch higher. But you are nervous. It makes sense, after all, you are about to start trading with money, and things are about to get very, very real.
The simple truth is that there are going to be bumpy days for you as a forex trader, but remember, it is common. What’s more important is how you cope on these bumpy days.
Here are some signs that will tell you if you are ready to begin live forex trading:
There are plenty of brokers and trading platforms for you to choose from, and each will likely have its own demo trading account for you to practice before going ahead with a live trading account. If you need help choosing one, it is best to speak to your investment consultant. You need to be able to connect with your broker easily if in case you have queries or if something goes wrong. You are entrusting them with your hard-earned money, after all. Once you choose a demo trading account, familiarize yourself with the trading platform. It’s not enough to know the basics, also learn about its features, especially if you want to exploit the platform for your benefit.
People often get confused with consistency and always winning. Experienced traders will tell you that losing is a part of the game, but delivering consistent profits makes you an excellent forex trader. So, while trading on your demo account, don’t beat yourself up if you’ve lost a trade or two. Instead, focus on what matters – honing your trading skills. Begin by finding high-probability setups that give you decent reward-to-risk ratios. Build trading strategies that ensure your losses are minimal while your wins are maximum. To be on the right track, you should monitor your profitability on your demo account each month. More importantly, it will also tell you where you can improve.
Three is a saying among traders, 50% of trading success is about finding good setups, and the other 50% depends on your risk management skills. The markets can go wild, and navigating them can be tricking. It is likely to doubt your analysis, strategies and trading skills. In such times, you need to be mentally strong and adapt to the changing market. In fact, during such conditions, it is your risk management skills that are likely to help you protect your account. So, before you go live, you should have a set of rules that keep you in check when you have lost enough, trading too much or little. Outline your risk management rules to include:
- Percentage risk
- Maximum drawdown to tolerate
- When to stop trading after a series of losses
As mentioned earlier, there are days you will find a dent in your online trading account, and on such days, it is imperative to keep your cool and relax. Identify what went wrong and construct and evaluate your solutions. Go back and look at the technical and fundamental factors that have affected your trade and see what you could have done differently. Do understand this isn’t going to be easy, considering it is your hard-earned money you are investing. However, to be this calm and collected, you need to plan your trades, calculate your risks and trade consistently, to understand what went wrong when things do go wrong.
Even if you can tick off all these items on this list, it will not guarantee your trading success. Remember, psychological factors come to play and having a resilient mental fortitude will go a long way.