The Things to Consider Before Opening a Live Trading Account
There is no doubt about it; the forex market remains an extremely attractive proposition for individuals who wish to boost their earnings and optimise their personal finances. After all, an estimated $5.3 trillion is traded on this market every single day, while its liquidity and the derivative nature of currency means that investors can profit even in a depreciating climate.
So, if you are interested in opening a live trading account and leveraging this unique marketplace, it may be tempting to launch your new, part-time career immediately. There are several considerations to bear in mind if you are to successfully invest your capital in this market, including the following: –
1. Have You Tested Your Strategy Through a Demo Account?
While accessing an online, live trading platform enables you to capitalise in real-time trends, there are other advantages too. More specifically, most online brokerage firms also offer their clients access to demo trading accounts, which allow them to hone the test their strategies within a live, but simulated, market environment.
This serves as a steep learning curve for traders, and one that educates them on the practicalities of forex trading without requiring them to risk their hard-earned money. It is therefore wise to trade through a demo account for a period of between three to six months before making a real money commitment, as this ensures that you have bridged the often-sizeable gap between theoretical knowledge and practical experience.
2. Do You Understand the Roles of Macroeconomics and Determinism?
Even if you are equipped with knowledge and experience garnered through your demo account, there are other considerations that can help to refine your trading activity. The most prominent are macroeconomics and determinism, each of which has a fundamental role in determining how your individual trades play out.
In terms of macroeconomics, this refers to the behaviour of the aggregate economy and its impact on specific financial markets. Including metrics such as inflation, interest rates and labour market performance, the combination of these factors has a direct impact on the value of currency and how specific pairings compete on the forex market. Understanding macroeconomics and the relationship that exists between each metric can help you to optimise your trading activity, even during periods of austerity.
Determinism is another important consideration, as a deterministic mind-set allows traders to understand the underlying laws that govern change in the financial market. This negates the risk that traders will make emotive and ill-informed decisions, as they understand which trends are impactful and which can be ignored.
3. Do You Have a Diversified Trading Account?
In many ways, taking the decision to trade currency is extremely exciting and something that should deliver a thrilling learning experience. It is also a serious business, however, while the volatile and derivative-based nature of the forex market also means that it is possible to lose more than your original investment.
It is therefore wise to consider diversifying your trading activity, particularly when operating online. After all, online platforms tend to offer access to a host of fiscal markets alongside forex, meaning that it is easier than ever to invest in a diverse array of assets and optimise your returns over a sustained period of time.
This tactic, when combined with relevant risk-management measures such as installing stop-losses on your account, help to optimise your capital and achieve higher returns that meet your expectations.