Are you like me seven years ago when you were very profitable on a demo account, making $10,000, $100,000, or $7,000, but when you open account and trade live, the difference is the case.
You wonder if your trades are being monitored, if you are under some influence, or if your wins were beginners’ luck. Follow me, and let’s discuss the psychology behind trading a live account.
Trading a live account can be quite different from trading a demo account. You can be a profitable trader on a demo account but lose trade after trade regarding a live account.
You need to understand a few elements before you can become profitable. However, before diving into these elements, let’s examine the difference between a trade analyst and a live trader.
4 Elements You Have To Deal With To Maintain Good Psychology Trading A Live Account
Trading a live account involves a lot of emotional control, which is absent when trading a demo account. Emotions like fear and greed can get to you while trading a live account, ruining your psychology. Fear and greed are absent when trading a demo account because you are given virtual funds, not actual or hard-earned money. Hence, there are no emotions attached.
Sometimes, you can place a trade and leave for a couple of days in losses (of which you don’t care), and in weeks, you check again, only to see that you’re in massive profits. You then start to think if it was your actual money, you could be making that much, and that’s where greed sets in.
But this is different when live trading. Come to think of it, if it was your actual money, there’s no way you could have forgotten the trade for days. More importantly, you would be so scared to execute the trade if it were your hard-earned money.
This is why a trader has to deal with a lot of emotional control. You are not just placing trades with virtual money. Now, you are at the forefront, analyzing and executing your trade. So, emotional control is one thing you must deal with while trading a live account.
The second element to factor in to maintain good psychology in trading a live account is risk management. Trading a live account involves you having a solid psychology regarding risk management.
This includes applying stop loss (SL), ensuring you don’t move your SL, and not risking more than you can afford to lose. You can risk 20%, 10%, 1%, or 0.5% of your account at a particular time. You must ensure you don’t inflate that percentage each time you trade.
Many people can become overconfident after a few winning streaks. Because you have been able to win about three to five consecutive trades, you tend to throw your confidence to the roof, and then you start overleveraging. This can bring a glitch to your psychology while trading a live account.
Most importantly, if you’re coming from a demo account and you’ve been winning consecutively, and you think this will continue on your live account, most times, this is not the case. You’ll notice that you see your trade running in red immediately after you start placing a trade on your live account.
This is often a result of overconfidence. Because you’re confident and can place a trade, you start using larger lot sizes, ignore actual signals, and don’t wait for your confirmations before hopping on the trade, hoping to have the past results you once had in your demo account.
Trading a live account means that you’re not emotional. It requires you to be disciplined and follow your trading plan.
To develop a good psychology, traders must have a resilient mind and a good thought process. This is because, in trading, what works today may not work tomorrow, and what worked yesterday might not work today—more reason why you must be adaptive to your new market environment.
The forex market is very dynamic. Anytime the chart patterns are changing, you have to change alongside. Anytime the timeframe interval or analysis changes, you must change with it. This is why, as a live trader, you must be adaptive and flexible to your bias (knowing when to flip sides) and when to be stuck on your bias.
Bonus Tips: Support System
One more thing you need to include when trading a live account is a support system. You need a support system, like a community where you can share good ideas; there’s a healthy competition where everyone is ardent about keeping journals and being accountable to each other.
Support systems are not created, so everyone tries to impress each other with the result. Instead, it’s about everyone being intentional about growth and uplifting each other through each learning phase.
A support system is everything in developing a good psychology. You can find that in your partner, sibling, or someone you respect a lot. Communicating with them helps you grow and psychologically provides strengths as you trade a live account.
Trading psychology is about knowing your enemies and discovering the various ways you can defeat such enemies. If you are in a phase whereby your psychology affects your trade, you must reach out to a mentor or someone who can help you grow the proper psychology.
Profitable trading is mostly 99% psychology and 1% strategy. Once you have developed good psychology, register with a trusted online broker, such as Olymp Trade, with adequate trading assets for a smooth trading experience.