10 Aug Switching to a live trading account

Points to take away from this read:

Decide how much you are will­ing to lose to give trad­ing a good try.

Trade small, get con­sis­tent, then grow.

Before you switch to a live account

Read on to find out how you can move on to a live account and leave the paper trad­ing behind. 

Big Time Spender account

When I first start­ed learn­ing, one of my first steps was to find a bro­ker and plat­form I could use for paper trad­ing. For those that don’t know, this means trad­ing with fake mon­ey. Some of these give you a huge account of 100.000 — 200.000 dol­lars in it. Which for most, is sim­ply not real­is­tic. I want­ed to mim­ic real life sit­u­a­tions and treat the ‘fake’ account as if it was a real one. At least… as much as I could. So how do you go about switch­ing to a live account? By being patient. For me, I need­ed to do a few things first before I went ‘live’.

Going where many men have gone before

You are not the first and sure­ly not the last one to start trad­ing. What sep­a­rates you from the rest, in my opin­ion, is your goal, your prepa­ra­tion, and your tenac­i­ty. Luck­i­ly, I can sug­gest a few things to the first two. The last one is up to you. Just like in busi­ness, just because a bak­ery has opened up shop some­where doesn’t mean you can’t open up shop next door sell­ing pas­tries. Again, your goal, prepa­ra­tion and tenac­i­ty will define your suc­cess. You might have heard that 10% of the traders make mon­ey off the remain­ing 90%. That’s a lot of peo­ple los­ing mon­ey. So get your mind right and let’s start with set­ting goals.

Everybody’s got an opinion

The opin­ions are divid­ed on how much you should start trad­ing with. How you should go about your trad­ing. To me?! They are all, in their own respect, right. I say this because it real­ly depends on sev­er­al fac­tors that only you can decide on your own. Things like how much you want to ‘win’ in any giv­en trade and how much you are will­ing to lose for it. How aggres­sive you are in trad­ing. How much you are able or will­ing to lose if every­thing goes against you. Keep in mind that you are still learn­ing and most like­ly will end up los­ing a lot before you start mak­ing some mon­ey. Even then, it still takes a while before you become con­sis­tent. And then some more before you can call your­self a suc­cess and start brows­ing for yachts. So it’s most like­ly going to be a long ride. So buck­le down.

IFTTT

Are you famil­iar with the awe­some app IFTTT (if this then that)? It’s an automa­tion app with very lit­tle to do with trad­ing. Although, there is a way to use IFTTT in your ben­e­fit when it comes to trad­ing, but more on that in anoth­er post. If you don’t know it please go check it out at www.ifttt.com. So, enough adver­tis­ing for free! Back to trad­ing. What I mean with the IFTTT approach is that you need some sort of plan to mea­sure your process and then con­nect an action to it. For me it went like this. I had a cer­tain amount in mind that I was fine with los­ing. More on that lat­er. I broke that up into three chunks. Why three? No par­tic­u­lar rea­son oth­er than the amount chopped nice­ly down into three. I would start tak­ing posi­tions using only the mon­ey from the first chunk. Then when I lost it all. The ‘IF’. I would stop. Gath­er the infor­ma­tion on the trades I had made and then spend some time ana­lyz­ing it to try and see pat­terns in the things that I did wrong. The ‘THAT’. I hope you didn’t mind the lit­tle detour we took ear­li­er. What this did for me is it cre­at­ed insights into the posi­tions I took. Over­all I guessed the right direc­tion but lost anyway.The trade would go against me first before going my way. Anoth­er thing I noticed were my emo­tions when it comes to trad­ing. Wow, what a roller-coast­er. I can be at times, more emo­tion­al than nor­mal. And this is anoth­er aspect of trad­ing that I love. You find out your own weak­ness­es, as well as your strengths. Then you can start improv­ing and build­ing on them. Learn­ing more about your­self in the process.

Decid­ing how much you want to lose

Wait, what?! Sounds coun­ter­in­tu­itive right? As with most busi­ness­es, it will need a cer­tain amount of invest­ment. Blood, sweat, tears and well… mon­ey. It’s all about how much you are able and will­ing to spend and risk los­ing until you become prof­itable. As with any busi­ness you should come up with a plan to start explor­ing the busi­ness before you dive in. Com­ing up with a num­ber you are will­ing to invest to try and make it work is a part of it. For me?! The amount I would be fine with los­ing was 1500 dol­lars. With this amount I felt I was con­fi­dent to at least gauge the mar­kets and my ‘game’. Or lack there­of, of course. Then I could make a deci­sion. Quit. Or go all in! Please take into con­sid­er­a­tion your own per­son­al sit­u­a­tion. I can’t stress this enough. I am sin­gle and have no kids at the moment and there are no oth­er peo­ple depend­ing on me. Com­bine that with the fact that I already have income streams that let me have enough time in a day to spend on trad­ing. Your sit­u­a­tion is most like­ly dif­fer­ent than mine so please set your goals accordingly. 

It’s all about the paper Benjamins.

Read this arti­cle if you want to know more about the plat­forms I have and still use. I start­ed with a paper trad­ing account for about 4 months. Try­ing to get a feel for it by observ­ing price action and what sev­er­al indi­ca­tors that I had learned do in real life. In the­o­ry they all sound fan­tas­tic. As if you could blind­ly fol­low the indi­ca­tor and make huge sums of mon­ey. Wrong! Hope­ful­ly you already know that it’s about a con­flu­ence or com­ing togeth­er of sig­nals that should make you want to enter or exit a trade. After I got a bit of a feel for the mar­kets I decid­ed to start tak­ing posi­tions with my fake account. I took these posi­tions at first kind of willy nil­ly because I didn’t have much of an idea to what I was doing. And every time I learned a bit more I tried to apply this to the next posi­tion I took. The account size I start­ed paper trad­ing with was 2000 dol­lars through FXCM and their great soft­ware Mar­ketscope 2.0. Why FXCM? Read this arti­cle. I tried to take the most real­is­tic approach I could. I would trade any­where between 1 to 5 micro lots which would mean my posi­tion size was only about 10 to 25 dol­lars US. With which I could live with los­ing in real life. After hav­ing blown through half of this fake account I was real­ly anx­ious to get start­ed trad­ing live. Even though I was at a loss. I just want­ed to get my feet wet. Per­haps I felt like I wasn’t com­mit­ted enough but most of it was being anx­ious to just get started. 

Dip­ping your toes in

As I men­tioned ear­li­er I would start trad­ing with mon­ey that you can afford to lose. To me that was 1500 dol­lars. Since I am not pay­ing for any cours­es and sub­scrip­tions of any kind I feel that what­ev­er mon­ey I put in will go towards my school­ing, my tuition if you will. 

Even if I would end up los­ing all of it… I sim­ply paid for my class­es and flunked.

Posi­tion sizes

I trade com­modi­ties futures on a lever­aged account (more on that here).My lever­age is 1:50. Mean­ing if 1 micro lot would nor­mal­ly cost 500 my account gets ‘charged’ 10 dol­lars. So even though I have a 500 dol­lar posi­tion, I don’t need to have 500 dol­lars in my account to be able to trade it. More on trad­ing futures with a lever­aged account here. This means I can win a lot for the small mon­ey I put down for it. But that also means I can lose a lot as well. After you are con­sis­tent in your trades you can grad­u­al­ly start increas­ing your posi­tion size.

So I put in 500 dol­lars into a trad­ing account (read here which one) and I start­ed trad­ing live.

Want to know what hap­pened then? Read this post on what I did with the 500 dollars.

Thank you for reading.

How did you go about start­ing with a live account? What were your regrets, if any, and what would you advise to oth­ers start­ing to trade? Let me know what you think. It is much appre­ci­at­ed. Also, please com­ment below with sug­ges­tions on how I can improve or just to say hi!