February 17, 2014

Textbook Forex Australia Trading and Real Life

Forex Australia Trading

This article looks at the difference between the theoretical and real life forex Australia trading you can do.

Before you trade on the live forex Australia market you need to go through a number of steps.  These steps will cover the training that you need to do and the creation of the strategy that you are going to use.  There are a lot of new traders who go through a lot of effort in creating the most profitable strategy possible.  The problem is that these strategies are ideal on paper and based on the theories that you know about the market.  What you do not know is whether or not they will be profitable in real life.

Creating a Theoretically Sound Forex Australia Trading Strategy

Before you trade live you need to have a strategy that you are going to use.  Most traders will look for a strategy that uses theories and core concepts that they are comfortable with and understand.  If you do not use theoretical knowledge that you understand then you are not going to be able to trade correctly.

The problem is that once the strategy has been designed it is tested out in theory.  Theoretical testing will often bring you different results to the trading that you do with the strategy.  What works in theory will not always work in real life and you need to consider this.  You should also consider what else you need to do in order to ensure that your trading is profitable both in theory and practice.

The Psychology of Trading

One aspect of trading that theoretical testing does not take into account is trading psychology.  Your personality and emotions will affect the way that you trade in a number of different ways.  It is important that you understand this and take it into account when you look at trading strategies.  You also need to consider the risk tolerance that you are going to have when you trade.

Emotions are the primary aspect of trading that theory does not account for.  When you consider how you are going to trade mathematically you will not consider the impact of emotions.  Emotions can cause you to divert from the trading plan that you have.  They can also cause you to trade in ways that you have not accounted for in theory.

The Use of a Demo Account

Before trading live you need to test your trading strategy on a demo account.  This will allow you to see how the strategy that you have works with the real forex market.  However, you also need to look at the limitations that the demo account has.  The primary limitation is that you have no risks which do not draw out the emotions of trading.  Demo trading does not prepare you for the emotions of the market and you have to consider this.

Using a Micro Account

If you want to test your theory and strategy properly then you should consider the use of a micro account.  The micro account should only be used after the demo account has verified that your trading will work.  The micro account is a lower risk trading account that allows you to prepare for the emotions of the market.



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