Online Paper trading plays a vital part in becoming a good trader. Let me explain what paper trading is. When you approach the various brokers you will notice that they will offer you a demo account. Basically this account is the same as a live (real) account except the broker will give you a nominated amount of funds that you will trade knowing that it is play money only.
It is very important that you use these accounts, first it will give you a chance to become familiar with their trading platform, this is necessary as when you start trading you want to be able to concentrate on your trades not the software you are using. Any mistakes made are often due to lack of experience and you can lose your money and you do not want it to be real money. Also you might try more than one broker before you feel comfortable.
The 2nd reason for online paper trading is simply this; you want to be making money with the demo account constantly before you risk real money. It is sensible to have winning trades for 3 months before you use real money. The Forex market is always going to give you the opportunity to trade, you do not have to rush into it. Also it is important that you trade with the same size trades as you will be when you open a real account. You want the demo account to be as realistic as possible, that way you are more likely to repeat your successes. It is easy to take more risks when paper trading because sub consciously you know"it does not matter". I would advise taking your online paper trading very seriously and that way you will get better long term results. It gives you the chance to test your system very thoroughly.
Equity management and managing your leverage margin accounts.
Regardless of what system you use for trading even the top traders have losing trades. It has been proven that equity management and managing your margin accounts is extremely important, it is the difference between success and failure. You have to run your trading as a business. The following rules are a good guideline.
1. Do not risk money that you cannot afford to lose. Every system has some losing trades, however using the right system will help control the losses
2. Do not trade more than 1% of your margin account on any one trade. If you are using a mini account for a value of $300 then 2% can be increased.
3. Always use a well placed stop loss order. This will prevent uncontrolled losses.
4. As part of your plan for each trade know when you are going to enter the trade and know when you are going to take your profit by using a limit order to secure your profit. By presetting your exit you will not be tempted to run on for a longer profit.
5. If you have several losing trades in a row it is best to stop trading take a break and try to analyse what went wrong. Wait until you are confident that you have a high probability trade then try again. You must believe in yourself first and your system.
6. Remember not to be emotionally involved. This is one of the hardest parts of trading. It works both ways, if you are winning you are tempted to increase the amount of each trade and believe high probability becomes certainty. This is not the case and it is when you believe that you cannot lose that you make mistakes and do not stick to your own trading rules. If on the other hand you are losing you begin to get nervous and leave trades that you should make and make an incorrect choice. Self discipline is the difference between successful and unsuccessful traders.
Good luck with your trading
Lyndsay is a successful entrepreneur and forex trader. Discover how you can get the best proven forex system and start trading successfully today. For the #1 forex system available check out http://www.best-fx-trading.com/
It is very important that you use these accounts, first it will give you a chance to become familiar with their trading platform, this is necessary as when you start trading you want to be able to concentrate on your trades not the software you are using. Any mistakes made are often due to lack of experience and you can lose your money and you do not want it to be real money. Also you might try more than one broker before you feel comfortable.
The 2nd reason for online paper trading is simply this; you want to be making money with the demo account constantly before you risk real money. It is sensible to have winning trades for 3 months before you use real money. The Forex market is always going to give you the opportunity to trade, you do not have to rush into it. Also it is important that you trade with the same size trades as you will be when you open a real account. You want the demo account to be as realistic as possible, that way you are more likely to repeat your successes. It is easy to take more risks when paper trading because sub consciously you know"it does not matter". I would advise taking your online paper trading very seriously and that way you will get better long term results. It gives you the chance to test your system very thoroughly.
Equity management and managing your leverage margin accounts.
Regardless of what system you use for trading even the top traders have losing trades. It has been proven that equity management and managing your margin accounts is extremely important, it is the difference between success and failure. You have to run your trading as a business. The following rules are a good guideline.
1. Do not risk money that you cannot afford to lose. Every system has some losing trades, however using the right system will help control the losses
2. Do not trade more than 1% of your margin account on any one trade. If you are using a mini account for a value of $300 then 2% can be increased.
3. Always use a well placed stop loss order. This will prevent uncontrolled losses.
4. As part of your plan for each trade know when you are going to enter the trade and know when you are going to take your profit by using a limit order to secure your profit. By presetting your exit you will not be tempted to run on for a longer profit.
5. If you have several losing trades in a row it is best to stop trading take a break and try to analyse what went wrong. Wait until you are confident that you have a high probability trade then try again. You must believe in yourself first and your system.
6. Remember not to be emotionally involved. This is one of the hardest parts of trading. It works both ways, if you are winning you are tempted to increase the amount of each trade and believe high probability becomes certainty. This is not the case and it is when you believe that you cannot lose that you make mistakes and do not stick to your own trading rules. If on the other hand you are losing you begin to get nervous and leave trades that you should make and make an incorrect choice. Self discipline is the difference between successful and unsuccessful traders.
Good luck with your trading
Lyndsay is a successful entrepreneur and forex trader. Discover how you can get the best proven forex system and start trading successfully today. For the #1 forex system available check out http://www.best-fx-trading.com/
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