I noticed a lot of new traders remain skeptical about the benefits of Demo accounts. Plenty of them just neglected an opportunity of getting experience through practice with virtual money. Such persons usually start trading Cent or Mini accounts excited and full of optimism about their new adventure. They aren’t afraid of losses at first, but eventually, give up without getting to the bottom of this thing. So, I decided to deal with all concerns about Demo trading. Let’s take a look at the common misunderstandings about Demo accounts: Is it just a waste of time to play with virtual money if you demo trade? Forex trading is all about the long-term. If you miss the practical part called Demo trading, you’re likely to lose money and make a decision that trading is not for you as well. But, in fact, lack of practice has an impact on decision-making. Stress and doubts can also disturb until you get used to them. It’s better to practice more in order not to return back to Demo account after the negative experience. It’s what I did wrong, and now it’s you who can save your time and efforts. Does it help to save money in future? Yes, and that’s why I recommend everyone to gain experience in forex trading. You have to understand how to benefit from market trends and news first. Also, a lot of traders make simple mistakes during orders setting (buy stop, buy limit, sell stop, sell limit etc). Personally, there is no reason to trade real money if you have less than 4-6 months of demo trading experience. So, why don’t we just reduce the money we lose from our mistakes… Why do I have to manage stress practicing Demo trading? It doesn’t work that way with real money Of course, we have to take into account a factor of psychology. If you begin immediately with live trading, you’re likely to step away after heavy losses. It’s not your thing you say and just quit. Trading on Demo accounts allows people to understand their own psychology, become familiar with different market situations and fit this process into their schedule.. In conclusion, if you’re serious about earning on forex on a long-term basis, you should be much better off as a trader. Take your time.
Robian, Very good write up and well explained. I have been in demo trading for 1 year and 3 months. It cost me $0.00 and I have learned a great amount and lots of charts experience. But I trade with real emotions and set daily trading goals for myself. When I first started trading, I used real cash and lost about $8000 in about 1 year because I did not know what I was doing. One of the challenges of trading demo is making sure you set a goal to reach within X months, this way you are seeking a challenge rather than just taking blind trades hoping and wishing.
Trading is a process. Anything that cements that process mentally and developes and establishes the habits needed to run the process successfully (without undo thinking) and cost nothing in terms of $$$ will reduce the stress when going live with real money because that is when a trader has to overcome the emotional and psychological barriers. To not practice means one has the added stress of running the process and struggling with doing something that has no habit established. The very reason why humans develop traditions and habits is to remove the stress of having to constantly burn energy making decisions about every little thing ...even the brand of toothpaste one will use...the routine for getting up and getting ready for work...ad nauseum. Imagine if EVERY day we had to make those decisions all over again. The key is to learn the right habits that fit one’s capabilities, resources, and time. And of course adding a dash of humor...ROFLMAO...LOL
Very well written volpri and thoughtfully stated. In my opinion, trading is the best business in the world because you can trade demo first for $0.00 to see if you can make money. Spend money on quality trading education.
The true value in demo trading is to reveal strategies that don't work. Once you find strategies that (appear to) work, you should trade them with small real money. You will learn things that were not revealed in demo... about execution/slippage, your psychology/behavior and more. No need to be in a hurry to get rich. More important that one learns to trade well. The money will come after that.
%% Another advantage; encourages lots of commissions. That can be a good thing, depending on which side one is on/profits. I like paper trading out of a losing equity trend; its like demo trading ,but slower + much more helpful//record. Good points.