We are at the final part of this series. I hope that you have learned a ton so far. Part 1 showed you how to find a strategy to test and hopefully trade later. Then in Part 2, I gave you a video on why you need to backtest and what to write down before every single test.
Now we get to the finishing steps. We will verify our testing in a demo account and I will give you some tips on finally going live on a real money account.
Now it is time to open a demo account and continue testing your strategy in live market conditions, still without risking any real money. Most Forex brokers offer a demo account, so you can learn how to use them. Open a demo account with the broker that you will eventually trade live with.
To help your research, here are some things to look out for and who I trade with. You may have different reasons than me for choosing one broker over another, so I'll leave the decision up to you. Basically, you want a broker that has:
- Excellent execution (your trade gets processed fast)
- Reliable and easy to use trading platform
- Small spreads
- Quality company with a lot of cash reserves (do your research!)
You are probably wondering why we need to keep testing, when we already did all that work backtesting. Well, as awesome as backtesting is, it still has some shortcomings…
- Since you can take trades at any time of day in backtesting, that might not fit in with your real life schedule. You might have to pick up the kids at some of the best trading times for your strategy. Forward testing will show you any time-of-day weaknesses.
- The broker you choose may have a platform that is much different from the backtesting software you are using. Use a demo account to give it a test run. You don't want to be figuring out how to place a stop loss when real money is on the line.
- There is a small chance that the pair you tested may have changed fundamentally over that past few months. Not likely, but if your demo trading is much worse that your worst case scenario in backtesting, you may want to hold off from going live.
- Your broker might have some rules that you didn't account for in testing. For example, some brokers limit the number of currency pairs you can trade in a mini account.
Best to figure out these things now, instead of after you have funded your account. In my opinion, you should Forward Test for at least 3 months (profitably, of course) before ever considering going live. If you are still unsure, test for longer.
When it is time to go live?
This is where you have to step over this line yourself. I cannot tell you when it the right time. Like I say in my disclosure, I'm not here to tell you what to do with your money.
However, if you have seriously gone through this entire process, I think you will know when you are ready. Even if you have doubts, some brokers like Oanda allow you to start with no account minimum and trade nano lots.
What are Nano lots? Nano lots are awesome!
They allow you to trade as little as 1 currency unit as opposed to the mini accounts at other brokers. The mini accounts usually have a minimum of 1,000 currency units per lot.
Nanos allow you to get into almost any trade with a $100 account and only risk 1% per trade. It will really give you good practice with a small amount of money.
You should start small
Even if you have been killing it in testing, when you start trading with real money (no matter how small), the psychology can be very different. So, starting with a hundred bucks will give you that experience without risking your wad. You can always deposit more later.
The process I outlined in these three lessons do the best job of preparing you for real money trading, but there is nothing like the real thing.
Hope this helped, if you want more detailed information on how to build a trading strategy, get my free Strategy Development Course.
Thanks for reading this series
If you liked this series, consider joining The Currency Alliance.
This is your opportunity to get in on the ground floor, save a ton of money and get access to a wealth of testing results. Click here for more information and instructions on how to join. It is only for people who are willing to work, but I believe that it can become a huge resource for figuring out what works and what doesn't. Think of it as crowdsourced strategy testing testing.
This offer will end soon, so if you are interested, act soon because I will take the page down when all the spots are filled.
Disclosure: I trade live with Oanda, but do not get any compensation for mentioning them. I just think that they are a great broker.
P.S. – If you have 10 seconds to answer 3 simple questions, it would be very grateful if I could get your anonymous opinion on a few things. This will help me deliver more information on this blog that will help you become a better trader. Thank you very much if you already answered the questions. Click here to help me out. Cheers!