8 Clear Signs You’re Ready for a Live Forex Trading Account
So, you’ve employed your strategies on the demo account and you feel you are ready to start live trading? Great! But how do you know for sure that you’re ready to switch over to a live Forex account?
Here are 8 clear signs you’re ready to invest your money in a live Forex trading account.
1. You are Comfortable Trading on Your Trading Platform and with Your Broker
There are many brokers and trading platforms out there, and each has their own demo trading account. Some of the trading platforms are CTrader, Ninja Trader, MT5, and MT4.
So, before you consider switching to the live trading account, you must be distinctly familiar with your broker’s trading platform. You should know all the features it has, not just the basics. It’s also crucial to understand how to use these features, if you want to obtain maximum benefit from the platform.
If you need help making a choice, you can check out the best Forex trading platform for beginners to help you make a smart decision.
2. You Have the Right Tools
Apart from being comfortable with your broker and its trading platform, do you have all the right tools to trade with? And how familiar are you with these tools? You’ll also benefit from having access to a reliable resource where you can get even more Forex trading tools and indicators to keep you at the top of your trading game.
3. You Have a Trading Plan
You must have developed at least some sort of a trading plan on your demo account. And you should have tweaked it until it started to yield consistently positive results.
In addition, you should have explored other Forex trading strategies and trading plans to make sure that what you currently have is absolutely the best for you. And if you don’t have a trading account yet or if it needs some improvement, use this trading plan checklist to make it better.
4. You Have Traded in Different Market Conditions
Market conditions in Forex are as unpredictable as the spring weather. It is best to equip yourself with the experience of trading in various market conditions before you start trading a live account. Otherwise, once the market conditions change to the ones you’re unfamiliar with, you’ll be forced to either lose money or stop trading.
Unfortunately, many traders suffer these consequences before they finally learn their lesson. But if you think you have been using a demo trading account long enough to survive in any market condition, you’re one step closer to becoming a live Forex trader.
5. You’re Making a Consistent Profit on Your Demo Account
If you haven’t been making a consistent profit on your demo account, you have no business trading a live Forex account. Well, unless you don’t mind continuing your losing streak on a live account where you’ll be losing your actual money.
The level of profit consistency, however, depends on you. You could demo trade till 70% of your trades are profitable. Or maybe only 60%. A rule of thumb is to make sure your net profit is at least two times your net loss.
6. You Have the Right Capital to Invest
It’s not enough to have just enough capital to invest, though it is important. Our article on how much you should start Forex trading with dwells on this topic in more detail. But you need to have the capital that is not going to affect your life in any way if you lose it.
It’s easy to think you are ready to invest your life savings and open a live
Forex account because you made some profit on the demo account. But here’s the thing that can be easily overlooked: every pip on the live account that goes in the opposite direction compared to what you have predicted is deducted from your life savings.
This can mess up your psychology, increasing the risk of making wrong decisions.
7. You’re Good at Risk and Psychology Management
There is no other option. Forex isn’t all about making profit. It’s also about reducing your losses. And nothing encourages losses as much as bad risk management and inadequate trading psychology.
- Do you know how much risk to take on a trade, even if you could bet your life that the trade would go your way?
- Do you know when to cancel a losing trade or take profit from a winning trade?
- How do you react to your losses?
- Do you get angry and trade more aggressively, hoping to recoup your losses?
- And how do you handle your profits?
- Do you unreasonably increase your lot size when you are on a winning streak?
You have to master your emotions and assess the risks properly before you end up burning through your capital on a live account.
8. You’re Patient and Not Looking to Get Rich Quick
A common mistake made by Forex traders switching from demo to live trading accounts is that they unreasonably increase their risks on live accounts, since they were doing so well using the demo ones before. They want to get into the live Forex market and become multimillionaires in seconds.
Unfortunately, this is not how things actually work. If you were trading the 0.01 lot size on a $100,000 demo account, why would you want to suddenly trade 1 lot size on a live account with $1,000?
Success in Forex trading takes time. It takes commitment and a lot of self-discipline. Don’t let greed or fear lead you into making wrong decisions. Patience, commitment, and hard work are the real signs that you’re ready for a live trading account.
Useful Tips on How to Preserve Your Live Forex Trading Account
If you’ve recognized all the signs mentioned above in your current trading style, then you just might be ready for a live trading account. Here are some handy tips to help you preserve your live trading account.
Stick to Your Trading Plan
Stick to that trading plan that has given you the confidence to switch from a demo to a live trading account. If that is the trading plan that helped you on the demo account, you can rely on it to do the same on the live account.
Don’t risk on a live account more than you’ve risked on your demo account. For example, if you maintained a strict risk to reward ratio of 1:2 on your demo account, keep it the same on your live trading account.
Don’t try to come up with another trading plan on your live trading account if you find out that your trading plan is failing you. You have your demo account for that.
Return to Demo Trading If You’re Failing on a Live Account
This is one of the hardest things to do, especially when your emotions are beginning to get in the way. When you are incurring more losses than wins and your account keeps sinking, you begin to trade aggressively and make irrational decisions with the hopes of quickly recouping your losses. This is a huge mistake.
You’ll end up driving your account into the ground faster than you’ve ever imagined.
Instead, take a break when you have reduced your account balance to about half of your capital. Return to demo trading and keep practicing. This time, observe the things you’re doing wrong and try to develop new strategies or try to improve them.
Otherwise, you would blow up your account completely and still be forced to return to demo trading at the end of the day. The only thing is that you would have nothing in your Forex account anymore.
If you have detected all or most of the eight signs mentioned above, you can consider yourself ready for trading a live Forex account. You can also use our article dealing with the topic whether you should start Forex trading to confirm that you’re ready for the live account.