Demo trading is part of the process of becoming a consistently profitable forex trader. It can help practice proper discipline and strict risk management rules. It also helps provide the needed experience in different market environments for each trader to find his trading niche.
Before starting trading with real money, you need to pay attention to several questions:
1. Have you been trading on a regular basis for six months or longer?
The forex market is always changing and that means that a system that is working for you on demo may not work as well six months later. You need to have enough experience to understand changing market dynamics, it will help your account to survive.
2. Have you experimented with trading different styles yet?
There are a lot of trading styles and forex systems. You need to make sure that you found the right one for you. You need at least to try scalping, day trading, mechanical trading, etc. It is important to understand all your options and find the method you are most comfortable with.
3. Are your winning trades outweighing your losing trades over a long term?
You need to be sensible: if you have not been profitable during demo trading, then you probably should not be trading live.
Your emotional decisions may overtake rational ones, leading to one bad forex trade after another. Make sure you understand what you are doing and that you can achieve consistent success.
4. Do you have a process for recording and reviewing your trades to improve performance?
Maintain a journal! It may sound simple and silly but if you put in the time for recording and reviewing trades while on demo, your live trading will benefit immensely.
5. Have you developed a trading plan and process that works for YOU?
One of the most important things is to have a solid forex trading plan and process in place. It will keep you in check and prevent you from taking haphazard trades.
If you cannot answer solid “Yes” to all these questions, you may want to reconsider going live. If you are already trading with a live forex account but experience constant losses, maybe you should take a step back and reevaluate. There is no shame in staying in demo trading until you feel ready.
