So you have been playing around with a Forex demo account and learning the ropes of Forex trading for the last couple of months. You have had a couple of wins, and gained a lot! What do you do now?
Well, the obvious choice is to jump into a real live account so you can start to make money with Forex. However, before you jump straight in, there are 3 things that you need to remember if you want to be successful at online trading.
Too often people will feel the rush of ‘winning’ on their demo account and think that they are ready to start risking their own hard earned money, only to feel the incredible lows that come when you lose that hard earned money! One solution to this problem is to ensure that you have considered these three things before you begin trading.
All Brokers Are Not Created Equal
We live in a world where people unashamedly profit off other people without a second thought. Which is why it is essential that you consider who you are using as your broker. The first thing to check out when choosing a broker is that their information is as accurate and relevant as possible. Too often beginners will be looking at outdated information and not even realise - this means that you have put too much trust in your broker, or not completed your due diligence in finding a trustworthy broker in the first place. Spend time on this before you start trading with your own funds.
An easy solution to ensure that you can trust your broker and their information is to ensure that you have used the demo account and become familiar with how the platform functions before you start using your own money.
Make Sure You Can Explain Your Strategy To Your Mum
If you can’t easily explain your trading strategy in general conversation then you have made it too complicated and are likely to lose money!
The easiest and most stress-free way to trade is by using the price action trading strategy. This strategy can easily be explained through price dynamics in the market, without involving unnecessary terminologies like trading software, equations, waves, or indicators. When you are just getting started with live trading, this is the strategy to employ before you start complicating things with unnecessary factors.
Understand The Human Pysche
Before you begin trading live with your own money, it is of great importance that you understand that as humans we become less risk averse after a win and more risk averse after a loss. In reality, this should not affect your decisions in a live trading market. Once you become aware of this human condition and recognise the signs that are influencing your decision making, you can learn to overcome them and make objective decisions.
Realising that for any given trading strategy there is a randomness to the winners and losers is the starting point. Over time you may realise that you win 57% of the time, which in turn means you lose 43% of the time. You cannot predict which trades are going to be winners and which are going to be losers, but because of your wiring, you are more likely to be less risk averse because you win more often than you lose. Understanding this, and learning to overcome it, is the first step to being a successful online trader.
If you are not sure about this human phenomenon, then check out this video from John Coates Is Biology to Blame?. John is a former Wall Street trader, so see what you think for yourself.
Being successful at trading Forex live is really all about thinking things through in a logical way. If you ensure that you can answer these three points, then you are well on your way to being ready to trade with your own money. However, if you cannot, it is time to go back to your demo account and put these three things to the test.