Whether you’ve been experimenting with a demo account for a while now or you’re new to the world of forex and are simply getting excited about when you’ll be ready to operate a live account, there are a few things to consider before you make the move.
Once you’re confident you know how to trade forex, will you be able to spot the signs that suggest you’re ready to move to a live account? Let’s find out!
You know exactly what you can afford to lose
One of the biggest risk factors associated with trading forex is of course losing money – and this is why you need to be aware of exactly what you can afford to lose at all times. This involves being honest with yourself and if your financial situation changes, the amount you’re able to invest will need to change, too.
With forex, it takes financial investments to make financial gains – that much is obvious. But you need to be sure of the amount of capital you can comfortably invest, and potentially lose, before you even think about moving to a live account. This way, your decision making won’t be influenced by changes to the market and even when things don’t go your way, you’ll never lose more than you’ve already decided you’re comfortable with.
You have your trading strategy nailed down
Once your live account is open, you’ll be using actual money in your trades – so you’ll need to be able to resist the temptation to mess with your strategy. Everyone’s forex strategies will be different, but from being able to contact your broker to understanding slippage, pip spreads and how to exit a trade, you’ll want to make sure you have the fundamentals in place.
Having knowledge of the platform you’re using is fundamental so that you’re not overwhelmed when making live trading decisions. If you don’t feel confident that you fully understand the platform, you’re probably not ready to progress to a live account just yet. What you need to focus on is finding what works best for you – and that’s why using a demo account on the same platform you’ll be using when live is a sensible option.
You’re confident in your risk management skills
With your strategy pinned down, you’ll need to think about risk management and how the two can operate hand-in-hand. Wins and losses on the forex market are dependent on a number of factors, and even the most seemingly bullet-proof strategy will need some element of risk management built in.
When the market isn’t working in your favour, it’s easy to begin questioning your decisions and all too tempting to start revising the strategy that, up until this point, has served you well. It’s crucial that you don’t let the volatility of the market alter your mind set, and this is where your risk management skills can save the day. If you’re not sure where to start, this can tie closely in with point #1. Keep a log of percentage risk you’re comfortable with, how much you can afford to lose and some rules around when to stop trading – this could be based on losses or wins but will give you some structure to adhere to.
You’re seeing consistent profits
Consistent profits doesn’t mean that you see big gains on every single trade, or even that you see any gains on every trade. What it does mean is that you’re regularly making a profit and your trading experience is moving in the right way for you. So, unless it causes you to lose as much as you’ve decided you’re comfortable with, you probably won’t want to get out of the game the first time you experience a loss.
Use your demo account to keep a track of trade amounts, wins and losses and how the risk weighs up against the reward. This will allow you to have as-close-to-real-life-as-possible picture of your experience and you can use this to help inform future decision making or highlight areas or situations which you need greater exposure to.
You know how to deal with losses
One of the hardest pills to swallow in the forex game is understanding that sometimes there will be losses – but it’s how you deal with those losses that matters. It’s important not to lose your cool, especially when it feels as though you’re on a downward turn, as this can lead to impulse decisions that deviate away from the all-important strategies we discussed in point #2.
The more experience and exposure you have to trading forex, the better it will be when you go live. Of course, any losses which occur in the demo stage will impact you in a completely different way to how they would if your own cash was at stake – which is why it’s so important to follow all other steps above before moving over to trading real capital.
If you’ve finished reading this post and are thinking “you know what, that sounds like me, I’m ready!” then we want to hear from you! Discover more forex trading tips and get ready to start your live journey with the Learn to Trade team – or, for more information on forex trading for beginners and to keep up-to-date with the latest industry news, keep an eye on our blog.