You’ve been trading on a demo account for months now and you think you’re ready to go live. But are you really ready?
Here are five signs to look for:
1. You can make profits continuously.
Making consistent profits and winning all the time are not the same thing. There is not a single famous Forex trader who can say that he has never lost a single trade in his entire trading career. Given the ever-changing market conditions, losing is part of the battle.
So, if you lose a trade or two this week, don’t beat yourself up. Instead, focus on honing your skills at finding high-probability setups with appropriate reward-to-risk ratios, and coming up with strategies that will help you minimize your losses and maximize your profits.
Make sure to monitor your profitability on your demo account every month as well. This way, you’ll know if you’re on the right track, and it’ll be easier for you to figure out what you need to work on.
2. Have clear risk management rules that you adhere to at all times.
It is said that 50% of your trading success is determined by your ability to find good setups. The other 50% is based on proper risk management.
Therefore, having a well thought out set of risk management rules is also a must on my list.
There are times when the markets are so volatile that you question your analytical and trading skills. During these times when your mental strength is tested, a risk management plan may be the only thing that can protect your account.
Before you even start thinking about starting live trading, you should check yourself to see if you have a well-defined set of rules that tell you when you are losing enough or when you are trading too much otherwise, you will destroy yourself.
If you haven’t defined your risk management rules yet, you can start by listing your risk percentage, the maximum drawdown you can tolerate, and when to stop trading after a series of losses in your trading journal.
3. Don’t lose your cool when your trade is losing.
Do you still panic when your trade goes against you? If so, you might want to rethink investing your hard-earned money.
I know, I know, it’s not easy to stay calm when you see yourself losing money. So what should you do? Make a detailed trading plan and follow it!
By having a plan to focus on, you will be able to think clearly and evaluate what has changed in your trades since you saw the setup or whether the fundamentals have changed in order to help you decide whether or not to stick with it.
4. Don’t take your losses too seriously.
If you suffer a loss in your account, you should not take the heavy responsibility upon yourself, regardless of how small or large the loss is.
Instead, you need to keep your cool and determine what went wrong and what technical and fundamental factors affected your trades.
Keep in mind that such a balance of thinking is usually achieved not only when you plan your trades properly and calculate the risks in advance, but after doing so consistently for a period of time. There is no alternative to achieving success except deliberate practice and gaining experience.
5. You are completely comfortable with your broker and trading platform.
Before you open a real account and risk real money on your trades, you should be fully familiar with the ins and outs of your trading platform. You don’t want to suddenly realize that you don’t know how to exit a trade when you’re about to, do you?
Apart from that, you should be aware of your broker’s usual slippage and spreads so that you can take these into account when placing orders.
This is why we encourage you to practice on a demo account from the same broker you plan to open a real account with.
Last but not least, you should be able to contact your brokers easily in case anything goes wrong with your account. You are entrusting them with your hard-earned money.
Let me end with a very small disclaimer: even if you manage to check off all the items on this list, it will not guarantee that your success trading on a demo account will be replicated on your real account.
Remember that psychological factors will also play a role. This is why it is also important to build up your psychological capital before risking real money on your trading ideas.