Opening Your First Trading Account? Here’s What You Need to Know
You just hit another nice winner on your demo account ….it’s been about 3 months now and, you might be contemplating the transition to a live trading account.
But before a trader starts trading on a real money account, it is important to have a solid foundation and be prepared for the different aspects of trading. Often, however, the opposite happens and traders open real accounts under the vision of getting rich quickly, without knowing what awaits them. The result is one thing - a deleted account and, what is worse, loose of motivation.
This comprehensive guide aims to equip aspiring traders with the foundational elements necessary before taking the plunge into live trading. Avoiding common pitfalls and building a solid foundation are critical for sustainable success in the dynamic world of financial markets.
What to do before your first trade on a live account:
1. Understand Financial Markets' Ecosystems
Start your journey by gaining a comprehensive understanding of financial markets. Recognize that each market operates as a unique ecosystem. Whether it's the dynamic and 24-hour forex market or the stock market's responsiveness to corporate results, comprehend the intricacies that define their behavior.
2. Mastery in Fundamental Analysis
Developing proficiency in fundamental analysis is paramount. For stocks, delve into analyzing balance sheets, earnings per share (EPS), and price/earnings (P/E) ratios. In the realm of currencies, scrutinize factors like interest rates, inflation, and governmental economic policies. Fundamental analysis unveils the reasons behind asset price fluctuations, aiding in predicting future movements.
3. Technical Analysis Expertise
Technical analysis prowess is indispensable for effective trading. Delve into chart study and leverage various technical indicators, including moving averages, to identify trends and potential changes. Familiarize yourself with advanced concepts like price action and smart money. Acknowledge that no universal strategy guarantees a 100% success rate; tailoring to individual preferences is key.
4. Passion for Trading
Trading may seem deceptively easy on the surface, but true excellence requires passion and interest. Ask yourself honestly if you can operate in a world of constant temptation, resist over-trading, and manage the psychological challenges associated with losses. Patience and discipline are prerequisites. If you're just seeking quick profits without addressing psychological hurdles, trading might not be the right fit.
Define your motivation for trading clearly, ensuring it aligns with positive goals. Avoid negative motivations like escaping challenges from other aspects of life. Trading is a continuous learning process, and maintaining a positive mindset, coupled with self-reflection and adaptation, is crucial for long-term success.
5. Platform and tools
Mastering the trading platform is essential for effective trading. Traders should strive for 100% clarity on how to navigate the platform, ensuring proficiency in entering and closing trades swiftly and analyzing markets through charts and indicators. Familiarity with the array of tools and features provided by the platform is crucial, empowering traders to elevate their technical analysis and decision-making.
Traders must also have a clear understanding of swaps and fees on the platform. This knowledge is paramount for responsible trading, aiding in the management of overall trading costs and optimizing profitability.
Choose a reliable broker who will not trade against you. Kumo Markets is an innovative trading platform providing professional and retail traders with market conditions and trading user environments. Our goal is to provide the best market conditions that can only be obtained by using institutional grade liquidity from the top tier and be a broker that provides professional trading conditions for a retail trader. This way we are able to offer our traders the lowest possible spreads with a part of them being zero or very close zero, while maintaining very low commissions, no re-quotes, and access to professional leverages.
6. Demo Trading Practice
Before venturing into live trading, practice your strategy diligently on a demo account. Use this time to build a trading plan, maintain a trading journal, and track your progress. Demo trade until you're confident and consistently profitable. Don't rush into live trading without adequate preparation.
Whether you decide to trade live or continue practicing on a demo account, the key is to be aware, prepared, and disciplined. Trading success is a journey, and each step, including demo trading, contributes to your growth as a trader.
7. Financial reserve
Before taking the plunge into live trading, engrain a crucial principle: Never fund a real account with borrowed money or funds you can't afford to lose without impacting your lifestyle. Trade only with funds that, if lost, won't jeopardize your financial well-being or force significant lifestyle changes. This disciplined approach to capital ensures that your trading activities align with responsible financial management, promoting a sustainable and controlled trading journey.
That's all. Only after all these 7 points are clear you can afford to open your first real money trade.
Before venturing into live trading, practice your strategy diligently on a demo account. Use this time to build a trading plan, maintain a trading journal, and track your progress. Demo trade until you're confident and consistently profitable. Don't rush into live trading without adequate preparation.
Whether you decide to trade live or continue practicing on a demo account, the key is to be aware, prepared, and disciplined. Trading success is a journey, and each step, including demo trading, contributes to your growth as a trader.
Stay educated and Trade responsibly with Kumo Markets!
Create a demo version of the account or schedule a conversation with our account manager.
