Is it time to open a real, live Forex trading account or not yet? By six telling signs, check if you are ready to trade in the financial markets.
Have you been wondering whether it’s time to open a real account after all those hours of training on a demo account? Or have you just discovered the world of trading and want to start profiting right away? First, get acquainted with the following list and decide if you are ready for it.
- You know the basics
Make sure that you know the basics of trading and investing. This includes all those terms like spreads, bid and ask, support and resistance levels, swaps, and many more, as well as trading techniques such as scalping, intraday, and swing trading. This knowledge will help you navigate the complex world of finance at the initial level.
2. You are comfortable with your broker and your trading platform
To trade stress-free, you should find a reliable broker with favourable conditions. First, it will spare you the emotional distress of worrying about the money in your trading account. Second, it will ensure that you lose as little money to various commissions as possible. OctaFX, for instance, has no commissions and no swaps. You can leave your orders for as many days as you want without paying overnight fees.
As for the trading platform, most traders choose MetaTrader 4 or MetaTrader 5 as their main options. OctaFX offers both platforms, but you should know exactly what each button and chart means to use them to your advantage
3. You’ve developed a trading strategy that brings you consistent profits
Before going live on a real account, creating a trading strategy and testing it on a demo account is essential. If it brings you consistent profits with a favourable risk-to-reward ratio, you can try using it on a real account.
It’s easy to count a risk-to-reward ratio. For instance, if your profitable orders amount to 100 USD and your losing orders amount to 50 USD, your risk-to-reward ratio is 100/50=2. Don’t let this ratio go below 1 and, ideally, 1.25.
4. You always use risk management techniques
Trading without a risk management strategy is like driving without brakes. You can do it, but not for long. Clear and strictly adhered to risk management rules, such as using no more than 4% of your capital for a single order and quitting it if the loss grows to 25%, stop you from losing more than you can afford. Stop Loss and Take Profit orders are necessary to cut your potential losses in advance and resist the temptation to leave the order open even when the profit target has been reached
5. You let analysis, not emotions, guide your decisions
Fear, greed, and hope are all too common among traders. When it comes to the prospect of earning money quickly, logical thinking tends to give way to emotions. Inexperienced traders open orders at the top of an uptrend because of the FOMO (fear of missing out) or quit them too late—when the price has changed the initially favourable direction and made the order unprofitable. Make sure you can keep your emotions at bay and use analysis to inform your decisions before opening a live trading account.
6. You use leverage efficiently
It is well-known that leverage is a double-edged sword. It does increase your capital and, consequently, your profits from successful orders. However, leverage also increases your losses when the price moves in the ‘wrong’ direction. Refrain from using high leverage to avoid ending up with an empty account minutes after the order has gone unprofitable. Always watch your margin levels closely and set Stop Loss orders in advance to keep your orders from triggering Stop Out levels. When you master using leverage on your demo account, be free to open a real account and start trading.
Do all the signs above match your trading experience and knowledge? Check what type of trading account suits your needs best and open it. Then, there’s nothing to stop you from achieving your financial goals.
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