Opening a live Forex account is a big step for beginner traders. Forex markets are a great way to invest, but there is a lot of risk involved, so you need to know you're ready before you open a live account. Before opening, you should have chosen a platform and traded successfully with a demo account. You need a strong, written trading system, and some capital you can afford to lose. You also need to prepare for the mental pressure of trading with real money.
1. A Demo Account
Run a profitable forex demo account for at least a couple of weeks before opening a live account. If you can't make money with a demo account, you won't make money using a live account. A demo account tests your trading strategies, mental strength and financial management without the risk and expense of a live account. Fixing a mistake on a practice account is as simple as opening a second account. Fixing a mistake on a live account costs real dollars.
2. A Tested Trading System
Your trading system is what makes you money. Without one, you are gambling on the market moving in the right direction. Good traders analyze trades and track results carefully. Write your trading system down on a piece of paper with clear, unambiguous signals for entry and exit points. As you trade your demo account, hold yourself accountable to these signals and record when and why you deviate from them. If you don't use a system, you will lose money.
3. Capital You Can Afford To Loose
The money you deposit in your Forex account should be money you can afford not to get back. Even the most experienced traders have losing streaks, and so don't be surprised if you start on one. Many traders have profitable forex systems, but it takes time to build your small initial investment to a large fortune, and trying to get rich quick is as good as throwing your money into a wishing well. If you're starting off with a small investment, wiping out your account is a very real possibility. Don't let it leave you in a financial bind.
4. A Risk Management Plan
All investments involve some risk of loss, but forex carries more than most. Successful traders limit their losses if a trade goes against them. In fact, most traders are wrong about half the time, but successful traders are just better at limiting their losses than unsuccessful traders. Without risk management, you are in danger of triggering a margin call when the money leaves your account, taking away any chance you have of making a profit.
5. Mental Strength
Forex success requires tremendous self-discipline. Trading real money is an emotional rollercoaster. You need the presence of mind, mental stability and patience to stay controlled under extreme pressure. It takes a long time to develop this strength, and it should be done with a practice account. After all, if you can't follow your trading system with a practice account then a live account will only make it worse.
If you have the mental strength, capital and practice, it may be time to open a live account. If you're struggling with your demo account, spend a little more time practicing before taking the plunge. Opening a trading account before you're ready is like writing a check to your broker, and you only want to do that after you've made some money.
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Disclaimer: Trading of foreign exchange contracts, contracts for difference, derivatives and other investment products which are leveraged, can carry a high level of risk. These products may not be suitable for all investors. It is possible to lose more than your initial investment. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. A Product Disclosure Statement (NYSE:PDS) is available from the company website www.clmforex.com. Please read and consider the PDS before making any decision to trade Core Liquidity Markets' products. The risks must be understood prior to trading. Core Liquidity Markets refers to Core Liquidity Markets Pty Ltd. Core Liquidity Markets is an Australian company which is registered with ASIC, ACN 164 994 049. Core Liquidity Markets is an authorized representative of Direct FX Trading Pty Ltd (AFSL) Number 305539, which is the authorizing Licensee and Principal.