Demo trading is a great way to get started in foreign exchange trading. It is identical to real trading, except that you're using "pretend" money. Demo trading allows you to get a taste for what type of events move markets and how they move. It encourages you to learn more about geopolitics, macroeconomics and global finance and these are all incredibly positive things.
Why demo performance is often better than live performance?
- Thread starter Rambo35
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There's many reasons for this. In my opinion the most important one is trading psychology. When you trade on the demo account you aren't risking anything so you remove yourself from the "what if" state of mind. In the demo you don't really care if you lose. If you lose it isn't your money so you aren't really losing anything. You avoid making the important money management decisions. This works in the opposite direction also. If you win, you just try and leave it there until you get the maximum return. Sometimes you don't check your platform for days. Sometimes you open positions that you wouldn't be able to open with your real money. In an account with real money you try and minimize your loses and have certain levels for profit which again means you are minimizing your profits also. Trading Psychology
In demo there is no risk of loosing your money because youe real money is involved in trading. Also with demo trading you can learn how to trade and it will guide you for your real trading.
In demo account, trading is very easy because you you trade without much emotion since your money is not involved with that they have nothing to lose and so most newbie trader do well in demo. But when it comes to live trading they constantly experience the fear of losing money and so lose focus.
lots of factors can affect demo vs live, like fear is one big deal, and another thing more factors affects the live trading such as traffic and server stability, brokers try to bring demo close to live but i dont think it will be ever be the same.
two factors.
1) the spread and execution are always different on a demo oposed to a real account.
2) the fear of losing real money can't be felt while trading a demo account.
1) the spread and execution are always different on a demo oposed to a real account.
2) the fear of losing real money can't be felt while trading a demo account.
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There is something in between that most young traders miss, which offers the same benefits of a demo account and replicates those returns nicely. That something is opening a trading account that is proportionate to what you can put up as risk capital. Too many traders assume either demo account OR an account much larger than they should be risking.
Trading on a demo account is not a good idea, short of just figuring out how to use functionality, as you need to make sure you have skin in the game to really be learning. HOWEVER, this doesn't mean put a lot at risk. There are so many dreadful things about retail foreign exchange brokers that people forget some of the amazing advantages. One such advantage is the ability to take small position sizes.
So go ahead and open a real money account with maybe $1000 and then go ahead and take position sizes equivalent to your account size. If you take a 1k position with a $1000 account, you are doing it right. This way, if you sell 1k EURUSD with your $1000 account and the Euro moves against you 100 points, you are down $10 or 1% of your equity.
I think if you approach the market like this with a real account, you will find that you are not stressing about the trading, while actually learning and inching closer to what it takes to be a successful trader. Don't get sucked into taking huge risk and just trade for the percentages. If you can turn your $1000 into $1100 at the end of the year, taking 1k positions, this will be a tremendous accomplishment. And if you can do this for a year, you will have the confidence to take on more risk and keep building towards a career in trading.
Trading on a demo account is not a good idea, short of just figuring out how to use functionality, as you need to make sure you have skin in the game to really be learning. HOWEVER, this doesn't mean put a lot at risk. There are so many dreadful things about retail foreign exchange brokers that people forget some of the amazing advantages. One such advantage is the ability to take small position sizes.
So go ahead and open a real money account with maybe $1000 and then go ahead and take position sizes equivalent to your account size. If you take a 1k position with a $1000 account, you are doing it right. This way, if you sell 1k EURUSD with your $1000 account and the Euro moves against you 100 points, you are down $10 or 1% of your equity.
I think if you approach the market like this with a real account, you will find that you are not stressing about the trading, while actually learning and inching closer to what it takes to be a successful trader. Don't get sucked into taking huge risk and just trade for the percentages. If you can turn your $1000 into $1100 at the end of the year, taking 1k positions, this will be a tremendous accomplishment. And if you can do this for a year, you will have the confidence to take on more risk and keep building towards a career in trading.
In demo account trading a trader trades without any fear, when he does that he uses his natural method for trading without any care. This is why its said that when you start trading in your real account like its your demo account, you get huge success in forex market.
and many more factors like, demo seems easeier the mind set has less alertness in it knowing that its DEMO, traders tend to jump and risk more in demo and if it goes well the profit comes with it, in live traders can be toooooo cautious, that might also lead to less profit and less opportunities taken. we should find the balance.
There are difference between demo and live account . Most traders view demo and live account as the same thing and on entering live account they find out that it is a different ball game and so they becomes very emotional when the loss start coming and their money is involved.
Yeah it because trading on 100K demo and ramping up their accounts with confident trades they switch to 300-400$ real account and continue on the same pace forgetting that risk they take with that trades are unacceptable for small deposit
and i guess Liquidity provider is another factor to consider, not so sure how it works with demo.
hello Rambo35,
well its more about 2 factors :
1- broker manipulation which happens if your broker was money maker broker type they usually attend to make the trading on disk as much as they can with playing with price on chart .
2- humen psychology to feel like they are not losing anything as its not real money .
really the point of having demo is to see how the broker price feed/data shall work with trading strategy in trading sessions , theres no point expecting the same results if you were choosen to go on with market maker type of broker .
i will be happy to help if you have any other questions, Good Luck !!
well its more about 2 factors :
1- broker manipulation which happens if your broker was money maker broker type they usually attend to make the trading on disk as much as they can with playing with price on chart .
2- humen psychology to feel like they are not losing anything as its not real money .
really the point of having demo is to see how the broker price feed/data shall work with trading strategy in trading sessions , theres no point expecting the same results if you were choosen to go on with market maker type of broker .
i will be happy to help if you have any other questions, Good Luck !!
emotions are present even while trading on the demo account. of course these will be positive emotions and they may actually lead you to open a real account.
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