- January 30, 2019
- Posted by: Trading
- Category: News
Switching from a demo to a live account is a relatively straightforward process. Depending on your broker, it could be as simple as clicking on a webpage a couple of times to fund an account, and start trading live. Ultimately, most brokers are trying to get you to trade live, and the demo is the first part of the process in taking a new client on.
One of the biggest things that should be noted is that trading a live account is much different than a demo account, at least from a psychological standpoint. After all, now you are starting to lose money and that is much more painful than being wrong on a trade. If you’re wrong in a demo account, your pride is at stake. If you are wrong in a live account, your pride AND your money are on the line.
When it comes to opening a live account, you will need to provide a certain amount of documentation. In general, you are typically offered a live account only after you can prove your identity, your residency, and any other legal documents necessary for the regulatory entity that the broker needs to deal with. Overall, you are looking at some type of government identification, and some type of utility bill from the address you are living at. Beyond that, there will be some legal documentation to sign that will be provided by the firm’s attorneys.
There is probably going to be some code of conduct agreement, as well as even more if there is such thing as a social trading platform. This obviously will differ from broker to broker, but in general these are the “hoops” that you will jump through.
Funding will vary from broker to broker, but most of them will accept bank wires, checks, and various types of electronic payment such as PayPal, Skrill, and many others. It is the funding part that the proof of identity is so important to the brokers, as there are stringent anti-laundering laws internationally that brokerage accounts used to be used against. Funding can take as little as a few minutes, or as much as a couple of days depending on the broker and the form used.
The psychology of going live is a bit of a mix. Initially, it’s an exciting time to be a trader because suddenly it becomes “real.” However, fear becomes a serious problem as well. Suddenly, losing matters, and you will notice that you are much less comfortable trading than you are when it is all paper trading. The psychological part of trading is without a doubt the most difficult, but it is also the most important. It is your psychology that will get you through the rough times, and keep you grounded during the high times. I cannot stress this enough: your success lies within the realm of psychology, and of course money management as well.
As mentioned previously, Money management is a huge part of your success or failure. The reality is that random trading can be profitable if you use the proper money management, and the psychology that is necessary. This is why so many traders can use the same system as another and come out with completely different results. It comes down to being able to keep your losses small, and let your winners run. I know that it is a cliché thing to say, but it is true, and that’s why you hear so much about it.
Prove to yourself you can win first
One of the biggest mistakes that I see traders making is that they don’t succeed in demo trading initially before risking money. That’s what a demo account is supposed to be there for, although I would admit that most brokers use it as a sales tool. Far too many people are too excited about trading with real money to learn how to profit over the longer-term. Most brokers know this, so they don’t have any issue giving away these free demo accounts, because they know that you will more than likely jump into the market long before you are profitable.
However, I would ask you this: “how can you expect to make money in the real world if you can’t make it in a simulated environment?” It’s very much akin to allowing a medical doctor to practice in the real world that failed in medical school. Far too many people think they are going to come into the markets and make a killing right away, not understanding just how difficult it is going to be profitable and successful in this endeavor. Overall, it can be a very rewarding career to be involved in, but you need to take your time and be patient about the way the market moves.
Switching from demo to live is relatively simple most of the time, but you do need to have the proper documentation. The real challenge comes down to making it. If you are not profitable in a demo account, there’s no way you’re going to do it in a live account. In fact, I can guarantee that you are going to end up losing your money. The average retail account is blown out in 90 days. Keep that in mind, but what I would say is that it’s all avoidable though, if you only take the time to learn how to trade, and only then start putting money to work.