The key metric you need to know to go to a live account
A lot of people get in touch with us asking when they can start trading with a real account. This is a genuine question and not as simple to answer as it seems.
If you are just starting on your trading journey, I really recommend you start in a simulator environment because you get to learn a ton of things without losing a dime. Such things might include:
- Shortcut keys. You will make several mistakes during your career because of keyboard entry errors. Better to learn while on a sim.
- Platform operations. Getting frustrated by not knowing how to open a chart can take a toll on your trading. Learn the basics of your platform while on a sim, that way you won't get unnecessary stress when you go live and need to find something within the platform.
- Order entry and exits. Are you fast enough to put orders in? Can you scale up and down using your keyboard shortcuts? Train your order entry skills in a sim first.
- Risk management. Exit where you need to exit in a sim. If you can`t respect your stops, you should never trade live.
As you can see, you can learn a lot from trading in a sim account, but when can you go to a live account?
Some people argue that as soon as you are fine entering your orders in, you are good to go regardless of your results because you must have real money on the line to learn real risk/reward taking situations while also learning to control your psychology. While I agree that psychology is a key element that people need to be trained on to succeed, I still think that you need to find some kind of positive consistency or a positive trend before going live.
The metric I find most important in order to decide is your pnl per trade. Are you making money on average on your trades? For example, you traded 100 times and you made 10k. Your average pnl per trade is $10. Good job, you are ready to move to a live or funded account. There is one caveat to this rule. If your avg pnl per trade is positive because you had a large win on 10 contracts of ES. That should NOT count. As a rule of thumb, you should always trade with 1 contract or 100 shares max. You are practicing your skills and holding a position regardless of the size in a sim is never going to be the same on a real account. Besides, it will distort your avg per trade giving a wrong picture of your account results.
There are other factors that you can consider before going live. The forex market allows you to risk pennies per trade, so you might be more inclined to start a live account before showing positive results. Perhaps blowing a 5k account to you might not be a big deal compared to your net worth. You might be trading in a prop firm where going live is essential to generate profits for the firm.
There is no shame on being wise about your hard earned money.