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How to transition from demo to live trading successfully

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How to transition from demo to live trading successfully

If you’re new to the financial markets, it stands to reason that you’ll be drawn to the notion of forex trading.

After all, this market is one of the biggest entities of its type anywhere in the world, with a total value that’s estimated to be in the region of £1.934 quadrillion. Not only this, but an estimated $6.6 trillion is traded globally every single day in this market, creating huge opportunities to profit from its innate volatility and inflated leverage.

In this post, we’ll ask how you can successfully transition from demo to live trading in the forex market, while considering why using real money is such a game changer.

Understanding the Forex Market and its Volatility

From a physical perspective, transitioning from a demo to a live forex funded account is relatively simple. 

It can also be argued that operating a demo account will have helped you to provide a practical outlet for your theoretical market knowledge, enabling you to hone your carefully cultivated strategies and sample the foreign exchange’s innate volatility at first hand.

However, the forex market remains incredibly volatile and unpredictable at all times, even if you’re able to build an inner sense of determinism over time. This means that you’ll need to remain switched on and mentally agile at all times when you begin to trade using your hard-earned capital, so that you can adapt to unexpected macroeconomic trends and price movements.

Not only this, but the mental pressure of trading using real money can be incredibly tangible, creating a scenario where your decision making may become impaired as you begin to transition to a live account.

The reason for this is simple; as real market volatility can cause seismic price movements in relatively short periods of time, and the threat of incurring disproportionate losses may impede your sense of discipline and cause you to panic sell in some cases.

As a result, even the best-laid strategies can quickly become ineffective, leaving you exposed in a volatile marketplace and gripped by fear over an extended period of time.

How Money Management Can Help to Focus Your Mind

Given the psychological challenges posed by live forex trading, it’s important to create a sense of focus that helps to both settle your mind and inform individual decisions.

Effective money management can help in this respect, and this will play a significant role in your success or failure as a financial trader. This certainly lends itself to improved profitability over time, particularly when it’s combined with a clearly defined trading strategy and core understanding of the underlying rules that govern change in the marketplace.

You can also use various online risk management tools to help manage and safeguard your capital, particularly prominent examples such as stop-loss measures.

Stop losses essentially enable you to automatically close positions once they’ve incurred a predetermined level of loss, helping you to cope with price fluctuations that can undermine the value of leveraged investments.

Imposing this type of measure is absolutely key; primarily because it allows for the reality of real money trading and the inherent risk of loss. It can also ease the psychological challenges associated with real money trading, helping you to make a successful transition from using a demo account.