Tips for switching to a real trading account
The transition to a real trading account is difficult and often leads to losses at first. Here are a few tips to know if you are well prepared. Make sure that you go through this checklist before you invest your savings in the ruthless world of forex trading.
1. You now achieve consistent profits
Earning consistent profits does not mean winning all the time. There is not a single professional trader out there that can claim that he hasn't lost a single trade in his career. Given the fact that market conditions are continually changing, losing really is part of the game. It makes no sense to blame yourself after losing one or two trades. On the contrary, you should learn from your mistakes and constantly seek trading patterns that have a high potential for success as well as a good risk/reward ratio.
A trading account's profitability is not measured daily, monthly statistics are sufficient to determine whether a strategy is working.
2. You have clear risk management rules
50% of success is determined by your ability to find good trading signals and to follow a pre-determined plan. The other 50% is based on proper risk management (money management).
There are times when the foreign exchange market's erratic movements can make you doubt your trading skills. During these times which test your mental strength, a risk management plan may be the only thing that protects your account.
Before switching to a real forex trading account, you need to have clear rules that tell you when you have lost enough money or that you have traded too much.
3. You don't lose your cool when your trade is a loser
Panic generates an emotion that does not enable you to manage a trade calmly. It is not easy to keep your cool when you lose money. So what should you do?
Make a detailed forex trading plan and follow it!
The trading plan allows you to remain concentrated and to assess a situation without being influenced by emotions.
4. You accept the fact that losses are normal
Regardless of the size of a loss, a trader must remain calm and analyse the situation to understand the technical and fundamental factors that caused him to lose.
You must plan your trades correctly by calculating risk in advance.
5. You understand your broker's trading conditions
Before opening a real account, you must be perfectly comfortable with the features of the trading platform, as well as the broker's trading conditions such as lot sizes, the margin required to initiate a trade, brokerage fees, the value of each pip, margin call levels, the specifics of each contract, the expiration dates of future contracts, the closing hours for market indices, etc... All of this information can be obtained when using a demo account.
Lastly, you need to be able to communicate easily with your broker if something goes wrong with your account.
Caution!
Even if you are able to agree and understand all of the items in this list, you will not necessarily replicate your demo account performance on a real account.
Remember that psychological factors come into play, the vast majority of traders lose because of their emotions!