5 Signs You Are Ready to Switch from a Demo to a Live Forex Account
Have you been trading Forex for several months on a demo account and think the time has come to switch to a live account? But are you really ready to take the plunge? In this post with assistance of Forex broker comparison service ForexBrokersAZ.com, you will find out 5 signs of whether you’re ready to switch to real money.
1. You’re making steady gains
Are your trades turning a healthy profit? You shouldn’t expect to win all the time because losing is part of the game. However, your trades should “end in the money” more often than not.
When assessing your performance, we suggest looking at the number of winning trades in the month rather than their aggregate dollar amount. This is because a single large trade can offset a string of smaller trades and skew the assessment of your performance.
If 7 or more of your last 10 trades ended in a profit, you’re doing well and should perhaps consider switching to a live account. However, if the majority of your trades “end in a loss”, you would better take more time to research risk management strategies and new trading strategies.
2. You abide by risk management rules
Some say that 50% of success rests on your ability to find market configurations with the potential to turn a profit. The other 50% is down to good risk management. However, when Forex market spirals out of control and spreads widen, risk management may be all you can rely on.
Before switching to real account, make sure you’ve laid out clear risk management rules. This can include anything from setting a threshold on the percentage of your portfolio to risk at any one time, a cap on total losses or a pledge to take a break from trading if you experience a string of losses. And if you have any ideas or rules of your own, please share them in the comments.
3. Keeping yourself cool if you lose
Do you experience sweaty palms or a racing heart when the markets move against you? If you answered ‘Yes’ to this question, the chances are you aren’t quite ready to ditch the demo.
In fairness, it’s hard to stay level headed when you experience either losses or a winning streak. However, it generally is a good idea to keep your emotions at bay and stay close to your trading strategies.
4. Understand past mistakes
If your account is in the red come the end of the month, don’t let those paper losses curb your enthusiasm. Keep your cool, review your trading history and do your best to understand past mistakes. If you trade on MT4, we suggest using Expert Advisors to back-test variations on loss-making trades. This is your chance to test new trading strategies with the potential to cap your losses and turn a profit.
5. You’re comfortable with your broker and trading platform
Make sure you’re familiar with the strengths, weaknesses and workings of your trading platform before you open a real forex account and put your money on the line.
If your broker has variable spreads, try to get a feel for typical spreads across Major currency pairs during the day. It’s also a good idea to check actual spreads in and around news events to avoid being taken by surprise by a widening of spreads when you switch to a live account.
If you think, you’re ready to switch, it’s important to remember that a demo account cannot completely mirror the experience you’ll get on a live account. In particular, demo accounts cannot simulate slippage or re-quotes because demo trades aren’t executed against actual liquidity. Speak to other traders or browse online broker reviews to get a feel for how your broker is likely to perform in a live environment.
This post was written by ForexBrokersAZ.com. Search and compare Forex brokers in the UK, Australia and South-East Asia. Find a Forex trading account that meets your experience and trading preference. With over 40 live and demo accounts, we’re confident you’ll find one that ticks all your boxes.
P.S.: Have something to add? Feel free to leave in the comments section.