From a psychological standpoint, taking trades on a demo account compared with trading in the live market are two completely different animals. Think tame house cat and wild lion! Regardless of how long one has successfully been trading on a demo account, pulling the trigger when hard-earned money is on the line is emotional for just about any trader.
So, when the big moment does eventually arrive to trade live funds, it is advisable to be as prepared and as organised as possible. Time and time again, traders enter live trading dosed high on excitement, which, for the most part, generally ends in tears. Remember, emotional trading breeds mistakes. One wrong error at this juncture may not only wipe out your account, but could also be extremely detrimental to your psychology before you've even begun!
Things you'll need to trade live:
- A brokerage account. With IC markets, you can Open an Live Account with as little as $200. That way, making your very first need not break the bank should you make a mistake.
- A trading plan. This should be easily accessible during your trading session. It should detail your method's rule, risk, money management etc.
- A clear head. No stress. No distractions.
- Position sizing calculator: Forex Calculators
- Economic calendar. We use both Forex Factory and Myfxbook.
- Strong internet connection. The last thing you want is your internet losing connection!
- Some chilled music in the background. This is an optional extra!!
Instead of simply explaining what one can expect when taking their first live forex trade, we thought we'd take it a step further and actually sit side-by-side with a (hypothetical) friend of ours: Susan.
Susan was first introduced to the world of trading by accident. like most of us were in the beginning, she was sceptical and thought it was nothing more than gambling. However, after she read her first book she was eager to learn more.
Due to her full-time occupation as a teacher she trades part time, sticking to the H4 timeframe and above. For the past three years, Susan has committed herself to learning this business, reading several books, attending numerous webinars and testing out different methods on her demo platform. About a year into her study, she decided that trading price action was a good fit for her. Indicators just never felt right. Following another two years of testing (both forward and back testing), Susan believed she was ready to make the leap. As advised by numerous experienced traders on the forums she frequented, she started her live account with a relatively small amount: $5000.
So, without further ado, let's hand the reins over to Susan...
Her first trade
Limit buy order in place? Check. Stop-loss order set? Check. Take-profit target correctly positioned? Check. Any high-impacting economic events that can affect my trade? Check. Risk set at 1% of my account equity? Check.
I've completed this process at least a hundred times on demo and know my trading plan word-for-word, so why do I feel so uneasy! Have I entered into the live environment too early, am I missing something?
With a third coffee in hand (a coffee always makes things better), all I can do now is wait and watch price as it starts nearing my buy order. This is the boring part. When I traded demo dollars, I would simply read a book to kill the time. However, trading with real money and given that this is my first live trade, I feel totally unfocused on anything other than the market. As the time begins to drag, my mind, once again, drifts into self-doubt: 'You'll never cut it'. 'You're a teacher, not a trader'. 'Go and do something worthwhile with your time'...
To try and muzzle these thoughts, I leave the room and go outside. Feeling the sun on my face, and after a brief chat with my neighbour about his freshly-trimmed hedge, helps bring me back down to earth. A lot calmer, I return to my office to be greeted with the sound of a price alert (this means that the pair I am trading is currently three pips ahead of my entry). Instantly, my heart begins racing at twice its normal speed. It is like I have been injected with a double dose of adrenaline!
I quickly slam dunk myself into the chair and wheel myself in for a closer look. After two minutes of almost no movement, my order is filled and my first trade is underway. I take a deep breath to try and calm myself, as I attentively watch price fluctuate around the entry point. It's difficult to put in words my feelings right now. A part of me is thankful that the trade is finally in motion, while another part is apprehensive.
I pull up my profit/loss value, something I know I SHOULD NOT do (a golden rule in my trading plan), and watch the money seesaw between negative and positive. This only exacerbates the situation. My heart begins to thud against my chest again, only this time with double the intensity. Considering I am only risking $50 here, this is not something I expected.
After five minutes the market finally begins to move in my favour. A sigh of relief smothers over me like a warm blanket on a cold evening. I open my terminal to check the profit/loss value again and see green dollars. While pleasing to the eye, I have just broken the same rule I did ten minutes ago. With that, I believe another coffee is in order. Whilst waiting for the kettle to boil, I find myself imagining, or should I say wishing, that my trade has already hit take profit. It'd be wonderful to tell Greg (my husband) that my first trade was a success.
Pausing the story here, we can see that Susan has managed to capture some raw emotion, which the majority of traders will feel once they make the switch from demo to live. With that being said though, as we can clearly see with Susan above, once you have your method tested and in place it's largely the psychological aspect one has to grapple with.
For a trader taking her first live trade, Susan has so far done remarkably well. A plan was in place, something that a lot of newbie traders either feel is not needed or simply do not know it's needed. There was no urge to ramp up the leverage. She also noted that there was no economic news on the horizon. This is important! In addition, she exhibited patience and did not try to jump in the market earlier than her pre-determined entry point.
Nevertheless, Susan had to deal with a string of negative thoughts. This can be destructive since retail trading is often a solitary practice. Each time you interact with the market you need to be 100%. There can be NO off days! During demo trading, one is calm and relatively objective. Once real money enters into the equation, things clearly change. Just look at how restless Susan became. It will take time for her to learn that she has absolutely no say on what direction price is heading. This is where thinking in probabilities helps. But again, this can take time to master.
It is said that trading is simple. It is us humans that make it complex. We firmly believe this to be true! Beginning to trade live is daunting. Try not to focus too much on the result, focus more on the process. Visualize yourself performing well! The majority of forex traders face mental roadblocks. By controlling risk, following your plan and keeping a cool head, you'll avoid many of the issues that cripple prospective traders.