9 Questions to Ask Yourself Before Opening a Live Forex Account

Meet Ralph.

He’s fiddled with a forex demo account for two weeks and decided that it’s time to put real money on the line. After setting up his very own live account with a broker, Ralph opens the forex platform right away to input his very first trade.

“It can’t be that difficult. All I have to do is find a trade setup, click a few buttons here and there, and I’ll raking in the dough! I can picture myself now living the life of a superstar Forex trader: making piles of cash and cruising down Sunset Boulevard in my brand new Ferrari, with Scarlett Johansson looking hotter than the devil’s underpants in the passenger seat! Ain’t no thing but a chicken wing!”

forex lossesUpon entering his trade, Ralph’s account shows a tiny loss, probably just because of that nasty pip spread. After a while, price starts moving against the direction of Ralph’s trade and he’s starting to feel a bit on edge. Negative 15 pips… 20… 25… A few more candles later, his palms start to get sweaty as he sees his account go deeper in the red. Before he knows it, his trade gets automatically closed by his forex broker on account of a margin call.

Believe it or not, this happens to a lot of traders who aren’t quite ready to make that jump from demo to live. They decide that they’ve had enough playing around with toy money and feel they’re ready for the real McCoy. But once they go live, they forget everything they learned that made them profitable on demo trading.

So, before you retire your demo account and see your balance in flames, I have a nice little trading experience check list you must be able to answer an unequivocal, resounding, and decisive “YES!”

  • Have you tried trading different time frames?
  • Have you experimented with trading different styles?
  • Have you been trading on a regular basis for six months or longer?
  • Can you properly rationalize each trade you take?
  • Are your winning trades outweighing your losing trades over a long term?
  • Do you have a process for recording and reviewing your trades to improve performance?
  • Have you made adjustments in your trading system after becoming discontent with the outcome?
  • Are your winning trades outweighing your losing trades over a long term?

And this leads us the most important question of all,

Have you developed a trading plan and process that works for YOU?

If you are leaning more towards “No” or a feeble “I think so,” you may want to reconsider going live. If you’re already trading with a live account but you’re feeling the heat after a couple of losses here and there, maybe you should take a step back and reevaluate. After all, there’s no shame in staying in demo trading first.

Demo trading is all part of the process – it’s there to help us become the traders we want to be without risking a dime. It’s there to help practice proper discipline and strict risk management rules. Most importantly, demo trading helps provide the needed experience in different market environments for each trader to find his trading niche.

By the way, we wanna hear how long you were in demo and how you knew you were ready for live trading. Don’t be shy to share your experiences in the comment box below!

  • Nick Latreille

    I’m still trading with a demo account after 3-4 months. I can answer yes to most of those questions, but don’t feel 100% ready, so I will stay at it for now. I’ve found that my better personal strategy isn’t working so well anymore for some reason, so experimenting with different styles is a big one. On top of that, I would add: “Have you tried trading with different leverage?”, since I was king at 50:1, but crashed my 400:1 demo account pretty quickly – Couldn’t handle it!

    • Mohd MacKi

      Leverage doesnt matter if you use proper Risk Management along with Proper Stoploss.

      • Pipwisher

        I fully agree. There have been cases I traded with 80% (just the limit of a margin call) of my $200 account did quite well.

  • Gary Wisniewski

    I don’t normallly comment, but have a good answer that may spur some discussion because I really wonder myself how other people trade. I opened my demo and traded for about 6 months before opening a live account. I never exploited the margin they gave me. Instead, I traded small amounts exactly like I imagined I could. I don’t have a lot of capital to put at risk, so pretending I had $100K in capital seemed foolish.

    Then, I opened my live account with $300 two years ago, and now have about $1000 and have never gone below 80% margin. I always do short-term trades that rely upon long term trends, so sometime’s I’ve kept failing trades open for days (or one time weeks) until they turned around. I’m very conservative, and don’t tend to trade the way most people recommend.

    But, I figure if I can turn $300 into $1000 in two years, I can turn $3000 into $10000 over the next two, and then $30000 into $100000 over the following two, and that gets me to the point where I’m making the kind of money I care about. It’s a long, 6-year learning strategy, and I really wonder if I’m just so risk-adverse that I go for long term strategies instead of quick gains. Curious what people think.

  • Pipwisher

    I would like to add: “Have you tried trading different parities / indexes / commodities?” Each one has their own “character”, being successful trading one does not mean you will be successful in others as well.

    I must say that demo trading doesn’t give me the feeling of real thing, so I can’t learn from demo tradings. I feel like I am playing around. Instead I trade micro-lots with my real account . With my broker I can trade 1 microlot of, say, NZDUSD with $2.00 deposit. If I loose it doesn’t hurt but it still motivates me to do the right thing next time. Believe or not, you can make money trading microlots.