Demo accounts are VERY useful for new traders. Especially for strategies on the day & swing time frames. Shorter term, and the inaccuracies of the simulation may be too big. Longer term, and you won't get a big enough sample to mean anything. If you can't consistently make money in a demo account, there's no hope of doing it in real life. The opposite isn't true though - you can make money in simulation and lose in real life pretty easily for technical or psychological reasons.
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We can learn different strategies and improve trading skills which will help the trader to perform better trading in real account. Trader should spent three to four month in demo account to understand basics of Forex trading.
For most novices it is essential. Why take a strategy live before you can make money in sim? Rule of thumb is you will do less well under the pressure of trading for real money so marginal edges will not cut it for the average new trader with minimal capital. Tip: Don't be afraid (or more likely ashamed) to go back to sim if you're off to a false start. False starts are not the problem; losing your capital is a big problem. Protect that capital ... as a trader it's essential to have it. And when you read about guys like Livermore who bust out and then get staked to make their comeback remember you are talking about extraordinary traders.
Quite frankly, I don't know how one develops any kind of trading system or methodology at all without first simulating what they are doing and testing for accuracy. Of course, you have to demo - unless you want to go back to the dark ages of manual "Paper Trading" (literally).
Yes a demo account is helpful. But on the other hand, when you start winning big and consistently in a REAL account, weird things start to happen, especially if you trade in the Forex market, where the broker acts as the counterparty to your trades... So don't assume these two types of accounts are the same, they are not.
Essential for learning how to use the software. Swan Noir's point that marginal edges in simulation will not work out in practice is certainly true. The fill's you'll get in simulation are usually not a good representation of the fills you'll get trading real money. The fill engines used in simulation vary with the platform your using, some are better then others, but none that I'm aware of are very good. There is one major broker who's simulation platform will fill resting, limit buy orders on the bid and sell on the ask, which is the opposite of what will happen most of the time when trading real money with this same broker. Anyone can make money if they can buy consistently on the bid, sell consistently on the ask, and pocket the spread, just like the old time Specialists! So when using a simulation platform pay attention to where it is filling your simulated orders, and make adjustments to your profits and losses accordingly.
In real account the situation is totally different real money involves in it and emotions also involves automatically so we have to trade in real account with proper money management skills.