Importance of Demo Accounts

[jellyeb]

Demo is the most decent way of learning Forex trading, but I also use back testing feature of Mt4 trading platform. Yes, no doubt demo is useful, but it’s a slow process! Besides, back testing is quick process! I used back testing after practicing my demo for 5 months.

What's your preferred timeframe for backtesting. I usually download 1H history data from Hotforex so it takes not so much time for testing like 1day for 1M timeframe.

 

[Anthony Lazarus]

I understand the peak importance of using Demo Account, but at the same time, did any one ever think that demo account can produce bad habit, really bad one?

 

[Ary Barroso]

I understand the peak importance of using Demo Account, but at the same time, did any one ever think that demo account can produce bad habit, really bad one?

How (bad habit)? I am really curious to know. Thanks in advance.

 

[bitley$123]

I understand the peak importance of using Demo Account, but at the same time, did any one ever think that demo account can produce bad habit, really bad one?

Demo can be bad in case if you are taking it seriously.

 

[Ary Barroso]

Demo can be bad in case if you are taking it seriously.

Really, but I think it can be bad if traders take demo as unserious. Demo is one of the best way to learn Forex business.

 

[Anthony Lazarus]

Really bad if traders take both serious and not serious in different perspective.
Why bad for serious demo traders? Because generally demo account have better execution as compared to live account. So when one open the live account, and see one less execution, he/she start blaming against broker for poor execution, why? Because you have habit in high execution (demo).
Why bad for not serious demo traders? Because you're trading with large amount, didn't care if you're at loss, you order at large size, left it out till next day without worrying about what's going on in that order you long/short, such lazy demo traders. I agree with the universal quote "Pain is the best teacher". So live is good option for learning trades. And demo is good option to acquire the basic knowledge of using the account.
Any other views on this?

 

[bitley$123]

Really, but I think it can be bad if traders take demo as unserious. Demo is one of the best way to learn Forex business.

Hey @Ary Barroso you are right! Actually that was a writing mistake, and I wanted to say that demo could be bad if you don’t take it seriously.

 

[Ary Barroso]

Hey @Ary Barroso you are right! Actually that was a writing mistake, and I wanted to say that demo could be bad if you don’t take it seriously.

It’s okay mate! Now I got it! Have a good day.

 

[AnnaFX123]

I understand the peak importance of using Demo Account, but at the same time, did any one ever think that demo account can produce bad habit, really bad one?

What kind of bad habit are you suggesting? May be if people are just passing their time on it without trying to understand or if they tend to be too careless just because it is not real money, then some might think that demo is bad. But in such cases I’d say it is the trader’s fault. Demo in itself is not bad. The fault lies in how we choose to use/operate it.

 

[Miller.d43]

I think demo has the utmost importance for the novice traders as well as for the expert ones. experienced traders use demo account several time to test their new trading strategies and for novice traders it is like boon which shows them the real picture of forex world before diving in it, even without spending a single penny.

 

[Ary Barroso]

I think demo has the utmost importance for the novice traders as well as for the expert ones. experienced traders use demo account several time to test their new trading strategies and for novice traders it is like boon which shows them the real picture of forex world before diving in it, even without spending a single penny.

That’s the power of demo; I used my demo for a long time before my live; that’s why I never faced MC on my live!

 

[Ary Barroso]

You tend to lose money more quickly than you think in live trading but a demo account doesn’t let that happen to you on your first day of trading. Demo account also help new traders in building new trading strategies.

Well said; this is why new traders always need to start their trading with the demo; otherwise newbie will face a huge loss initially!

 

[Leebax]

Demo is vital to practice getting your strategy locked down. No point in being live and practicing to lose real money, it doesnt make sense

 

[Steveday]

I believe that opening a demo account is very important when learning to trade. Even though you obviously do not have the same pressure as with live accounts, it can be a great way to learn the basics and also test out new strategies.

 

[hakuna matata]

A demo account is important as it helps you to familiarize yourself with the trading platform. You get to know its features like how to buy and sell , and much more. So it is a great way to see what works for you and what does not since your real money is not invested in a demo account. Apart from that you can test your strategies before trying them out on a live account. A tip here would be - One should constantly make profits on a demo account , before witching to a real account.

 

[Steveday]

Very important, I used a demo account form the first 6 months of my trading. I still use now and again when trying out new strategies.

 

[georgequayle]

There are a lot of platforms which help new traders get acquainted with the rules of trade. They do this by enabling those traders to practice trading strategies through demo accounts. What are demo accounts, one might ask. To answer the question in short, demo accounts are dummy accounts which are used solely for the purpose of practice. It is like “test-driving” a car in supervised premises before one actually takes it out on the busy streets. These accounts are of paramount importance; for without these, a trader would be completely lost when it comes to actual trading. These demo accounts prevent a trader from suffering losses early into his trading stint, and these also give a trader all the necessary ideas regarding what he should expect from the eccentricities of the liquidity market. No matter whether it is foreign exchange, stock trading or a trade in commodities, demo accounts are mostly indispensable for conducting trade online. Numerous ways are documented below, in which trading through demo accounts could benefit people: (information shared by [URL deleted])

Teaches Traders to Link News with Price Levels: One of the greatest features of the foreign exchange market, when you compare it to the stock and commodity trading markets, is that the former is seen to move at a snail pace, when it is contrasted with the two mentioned later. However, this chiefly happens when there is no trading with leverage. However, once the trader has money in the Broker’s account, then they would see a huge change in the way the price fluctuates, specially if it is in response to big finance-related developments, or incidents related to political news.

The Platforms Can Be Understood: As already mentioned, all demo trading accounts assist the trader become acquainted with the ways and means of survival and profiteering in the market. Not just that, it can even give the trader a beginner’s guide regarding how to use a platform appropriately. Both of the above are quite important if one is looking to get off to a profitable start.

Teaches the Link Between Size and Profitability: No number of times is enough to emphasize on the size of a particular trade and how important it is for a trader looking to profit. Sadly however, its importance is not realized enough by most beginners. Though using a demo account will make them informed about the tendencies of currency movements that take place daily, if one cares to pay enough attention. In case a particular pair is extremely volatile, trading in large lots is a really bad idea. On the other hand, a currency which is stable for can be traded in big lots.

There’s Scope for Back-testing: If a trader is able to pick up a few strategies, then the first thing that they should do is to test how effective they are. However, a lot of traders are jittery on their first outing in real-time trade, so a demo account would be useful in aiding them to get rid of the frights by making them gain confidence in their strategies. This is done chiefly by allowing the traders enough practice by testing their methods on past, archived situations and see how the results turn out. This would give them an insight on how the market would react under specific circumstances.

A fundamental in trading

 

[REB_FX]

Thank you for this post, very thorough and great advice for new traders here.

 

[mark_t]

Yes, definitely demo accounts are important. The practical side of trading, every new trader can easily learn that through demo trading.

 

[Baazex]

Trading with demo account is vital when one is a new trader Going directly to live, means taking too much risk of loosing money .Its best for them to trade risk-free with a demo trading account.