There is much to be said for trading with real money.
Even ‘small money.’
It’s a completely different world to demo trading because of the mental aspects of assuming risk.
But expose yourself in a SMALL way to begin with. Especially since it’s so easy to trade micro-lots with most brokers these days.
Build up your resistance to performance-pressure gently. It means your chance of long term success grows exponentially.
But how do you know when you’re ready to move things up a notch?
Ask yourself these 5 questions whenever you consider increasing your trading account size
- Am I sticking to my strategy rules without fail?
Be honest; if you’re flying by the seat of your pants and trading without a clear plan, sod’s law says the markets will bite at the worst possible moment – right when you’ve risked more money than usual. But it’s easily remedied: just make sure you have a clear strategy in place. You need to know exactly what to do next at all times and a good strategy plan falls under these 5 main headings: what to trade, how much to buy/sell, when to enter a trade, when to exit a losing trade, when to exit a winning trade. Make sure you’ve got all those points covered before taking on more risk.
- Is my strategy delivering consistent profits?
If your strategy is unproven, or is going through a prolonged period of drawdown, throwing more money at it is not the answer. Backtest, tweak, go back to demo trading until you get it delivering consistent profits, and keep the rest of your powder dry until that time.
- Am in control of my emotions when trading at my current size?
Any feelings of panic, extreme fear, aggression, loss of temper etc… will be amplified manifold when more money is dropped into the mix. Instead of increasing your trading size you should work on desensitizing your emotions at your current level.
- Are trading results affecting my life outside the markets?
Are you taking your trades away from the screen with you? Is it affecting your mood, your relationships, your sleep patterns? If so, go smaller instead of larger. Scale your trading size down a level until it doesn’t affect you and work on sizing-up again from there.
- Am I totally confident in my broker, the trading software I use, and any other tools I use?
Make sure you’ve got all other bases covered before risking more money. Make sure you can completely trust your broker, and that you’re happy with the charting software and trading software you currently use. Do a little audit of the tools of your trade and make sure there’s nothing that needs optimising or improving before injecting more bankroll into your trading campaign.
And once you’ve worked your way through that little checklist congratulations are in order: you’re treating your trading like a business and respecting your trading funds appropriately.
You DESERVE to be trading at larger size!