XM Live (Real) vs Demo (Virtual) Forex accounts- Differences and Features

Forex Live trading vs Demo trading

Forex trading beginners are often encouraged to open a demo account before putting real money at risk with a live account. With a demo account, you can practice newly learned skills, try different strategies, and get a sense of market conditions and transaction execution without the risk of actually losing money.

But how do you know if you’re ready to move to a live account after trading with a demo account for a while? Here are some signs to consider:

The first important thing to consider is whether you have built a solid trading strategy that you are comfortable with as a result of your trials. These trading strategies should specify a time frame and currency pair outline that will be of interest, including technical indicators, parameters, entry and exit conditions, and so on. Of course, if you can make a consistent profit, you will be confident that you will continue to execute a specific strategy even with a live account, so it is important to keep a record of using a specific strategy.

Another thing to keep in mind is that you need to have a good risk management plan before opening a live account. These risk management plans include how much money is exposed to risk per transaction or based on total transactions, how long a position remains open, or the maximum amount of positions that can be opened at one time. It is included.

If you can continue to follow these rules throughout the demo transaction, you will likely be able to manage your risk well with your live account. After all, the actual sight of possible losses and benefits can arouse emotions such as desire and fear and complicate the decision-making process.

For many traders who have just moved to live trading, the temptation to deviate from their trading strategies and risk management plans is much stronger than in demo trading, so you have to stay calm and make a profit. We need to work harder not to be overwhelmed by the pressure of not being. Potential losses can result from over-trading or dramatically increasing risk in an attempt to simply pursue further profits or recover losses.

This leads to the following factors. It’s about keeping calm even if you lose money or suffer a big drawdown. Keeping calm without being emotionally affected is not an easy task, but you can get it after a few months of training in a demo transaction.

Finally, it is also necessary to be able to interact comfortably with your Forex broker and to understand how the trading platform works. This allows you to resolve the problem yourself or contact customer support easily if an error occurs. After all, you are trading with the hard earned money, so you need to trade with a reliable broker.

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What is Trade Psychology?

What type of person do you think of when it comes to discipline, emotional control, and strategy? What kind of person comes to your mind first? Are you a soldier? Chess player? That’s right.

However, when prices are volatile in the market, these three factors are important to avoid risks and losses. These characteristics are described in the financial markets dictionary as follows: Trading Psychology. It’s so important that it has such a name. However, this theme is more complex, and understanding it by new traders will make the difference between achieving trading goals and exposing them to unnecessary risks. Here, we will introduce the contents.

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Trade psychology

It is dangerous to trade with emotions. When a trader is dominated by emotions and impulses, he can ignore analysis and strategy and go beyond risk tolerance. As a result, you are exposed to losses that you should be able to avoid and risks that you should be able to avoid.

In addition to this, according to clinical studies investigating the correlation between emotions and trading:

“Specifically, according to survey data, subjects with strong emotional responses to monetary gains and losses, both positive and negative, had a significantly poorer trading performance. This is successful trading. It suggests that there is a negative correlation between behavior and emotional response. ”

In trade psychology, the main emotions that cause most of the harm are fear, greed, anger, and revenge.

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Psychological barriers for effective trading

1. Fear

Traders take fear-impulsive behavior when the market moves in a direction that is unfavorable to them. Consider the following scenario: In your analysis, the price of an item is expected to rise by the end of the trading day, but it started to fall during the trading session. You did not follow the analysis and you closed the transaction. The price has recovered and ended at a positive price as you expected. It’s not an immediate loss, but fearfully, contrary to my analysis, I ended the positive trade early.

2. Greedy

Fear is usually a reaction to negative emotions, but greed is usually motivated by overconfidence. The results may differ, but the outcome is the same as fear. That is, you deviate from your trading strategy and expose yourself to avoidable risks. An example of greed is to continue positive trading for a long time in the hope of more profit. Assets are overbought (or oversold), reach support and resistance lines, reversing price movements and canceling potential profits.

3. Revenge trade

After losing a series of trades, you may want to rush to make unplanned trades to recover your losses. My advice for this urge: “Don’t do it.” One of the best ways to relieve trading sentiment is to have a strategy of looking at the overall P & L rather than individual transactions. Even if a day’s trading is not profitable, you should consider it successful if the overall trading activity over a period of time is positive. No matter how good a trader or investor is, it is not certain. The market is unpredictable and is affected by a myriad of factors. By accident, events and policies may not be on your side.

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Preparing to avoid poor plans

As mentioned earlier, a good strategy is how much risk you can tolerate to get the potential benefit, given the risk-return ratio, that is, the size of your account and the margin requirements of your portfolio. Therefore, adhering to your trading strategy will help you avoid unnecessary risks.

A good strategy is extremely detailed, such as the trades to be made, entry and exit levels based on technical and fundamental analysis, and historical trade data. It’s very difficult to build something without a plan, and it doesn’t even take into account multiple variables that affect the market.

Many analysts, professionals and institutional investors believe that not having a plan is almost certainly a failure.

Keep a transaction diary

Keeping track of your trading activities can help you refine your strategy, make adjustments, and avoid making the same mistakes again. If market conditions are similar to past periods and you have survived them positively, you can gain further insights by reviewing your trading behavior during that period.

The study

As you read this article about trading psychology, you are already heading in the right direction.

Be flexible

Trading strategies should be adhered to, but optimization and fine-tuning are always necessary. The market is constantly moving, so the ability to respond carefully and carefully is important.

Has both upper and lower limits

XM guarantees stop-loss for free and you can use take profit to set risk and profit limits. The function of stop loss is obvious and closes the transaction when the maximum loss amount is reached.

You may be wondering. Why do we need to set a profit cap? The problem is not the possibility of getting more profit, but the possibility of price reversal. If you calculate correctly, you can find a lower risk price range, trade and close. Each trader has his or her own preference, but through trial and error and experience, you will find the one that suits you best.

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How to deal with stress of Forex trading

Managing stress is also essential for trading. When stress builds up, you may act impulsively, ignoring trading strategies, exit points, and entry points. Keep in mind that trades are marathons, not sprints, so you need to focus on the success of your entire activity, not just one trade. For example, consider hedging.

That is, set up a transaction that theoretically offsets the risk exposure from another transaction, or if they are positively correlated.

If you start to feel stressed by volatility or the market moving against your trades:

Take a rest

Take a step back, drink a glass of water, and review your trading diary and trading strategy.

Reduce risk exposure

In general, it is recommended that the transaction amount does not exceed 1-3% of the total account. The stress may be due to over-leveraging or over-exposure to the market.

Margin-Stop Out

This is a bit related to the stress factors above, but it definitely raises cortisol (stress hormone) if there is a possibility of margin call during a positive trade. Again, you should be able to lower your risk exposure and avoid unexpected margin calls if your account has enough funds.

XM platforms and apps that allow slippage-free trading with fixed spreads

Is it more stressful than dealing with an unpredictable market and adding more variables to it? Floating spread brokers (also known as floating spreads) widen spreads at higher latencies, significantly increasing traders’ costs. Slippage can also increase costs during volatility. Basically, slippage is the difference between the rate at which a transaction is made and the pips until it is executed. This can be beneficial, but most of the time it isn’t. Fortunately for you and your stress level, XM has no slippage on web and app platforms and features fixed spreads on both web and app.

Take advantage of stop loss and take profit

Most of the negative effects of trading psychology are related to opening and closing transactions when they shouldn’t. Stop-loss can automate this process a bit more to avoid potential human error and emotional trading. Stop Loss closes with maximum risk tolerance and TakeProfit closes with a preset profit level, protecting you from price reversals.

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Overcome anger when trading

Losing once, losing twice, I’m frustrated not knowing what went wrong. Leave it to anger and start another transaction. Unfortunately, trading with anger puts you at unavoidable risk, and impulsive trading often has catastrophic consequences. However, if you follow the steps above, you will not have any negative emotions while trading.

If you feel like you’re trading in anger, take a moment to consider it:

• Have you ever lost in multiple trades in a row?
• Are these losing trades part of your trading strategy or are they trades on the fly?
• Did you try to recover your losses by starting another transaction?

If you answered “yes” to some or all of these questions, be aware that you may be trading in anger or for revenge. To effectively control your anger, you first need to take a step back. This is true even if you are trading consecutively to avoid overconfidence.

Now that you’ve dipped your toes into a pool of trading knowledge, why not dive first? XM does more than just provide a rich library of useful materials such as ebooks, articles and videos. To learn about trading, XM offers its customers access to XM Academy, which is free and informative, with dozens of courses, including multiple videos and knowledge tests.

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