A majority of investors begin trading live before they are actually prepared for it. As a result, they end up losing a lot of money through a series of bad trades. So how can you know that you are finally all set to make the transition to live trades? While there is no set formula to tell you that you are ready, you can certainly look for cues that point towards it. Here are 5 factors that tell you so:
1. You know the basics: Before you set out to trade live you should be well-acquainted with the rudimentary basics like the various trading methods and instruments, use of margin and leverage, the levels you are comfortable trading in etc. If you have sound knowledge of the fundamentals both in theory and practice then you can think about taking the plunge. Also, you should know your strengths and weaknesses well before risking your money in a real-time setting. Being familiar with yourself as well as the market will give you the confidence to move ahead.
2. You are making profits with your demo account: If you are posting steady profits through your practice account it's a good thing. However, that could be due to sheer luck rather than your trading calibre. Only you can find out if your gains are a result of your education and practice or just happening by fluke. You can easily asses your performance through your number of winning or losing trades rather than the virtual money that you are probably winning. If your results are poor then it's better to stick to your demo account for little longer rather than rush into jeopardising your hard-earned capital.
3. You believe that you were born to trade: We all fancy the rich lifestyles of forex trading millionaires and desire to possess such wealth, but in reality, it's not easy money. You have to live, eat and breathe currency trading. Only someone with extraordinary passion, perseverance and trading discipline can hope to excel as a forex trader. Like profits, losses are also an inevitable part of forex trading. You must have total control over your emotions and be able to accept both your wins as well as losses with equanimity so that you do not tend to overtrade and wreck your account.
4. You have a good risk-management strategy: Currency trading success depends on a good trading setup and a strategic risk management plan. At times the market behaves quite capriciously and your trades start going against your favour. During such situations, only a good risk management strategy can protect your account. If you do not have a sound plan yet it's time to get one soon. Knowing your risk appetite, the maximum drawdown that you can tolerate, being aware of when to stop after a series of consecutive losses are factors that cannot be ignored.
5. You are familiar with your trading platform: You should be well-versed with your trading interface and know it like the back of your hand. Open a demo account with a broker first before deciding to open a live account with him. Also, you should be aware of the pips, spreads etc that your setup offers. Your platform should be a user-friendly one besides being fast and accurate so that you can always trade with an edge. After all you are risking your hard-earned money.
