When most new traders cross over from the demo account to live, they usually believe they can easily replicate their trading results on a real account. Because of that, some of the traders are left very disappointed when they learn that this isn’t always the case. Beginner Forex traders are sometimes encouraged to start a demo account before risking real money. Thus you can test your newly acquired skills. But, if you’ve spent some time with a demo account, how can you tell if you’re ready to open live account?
As a common way for a forex trader to use their transaction execution services and fund deposit as a margin for trading, most online forex brokers give potential clients a free forex practice account. Generally known as the forex demo account, these accounts allow a trader to demonstrate what he feels like in the forex market to trade forex currency exchange pairs without risking any real money.
Even if you wanted to accept your demo account as a real forex account, it is true that a demo does not pose a real monetary risk. Here and there, you might suffer some losses but, in the meantime, you know that your demo account will be loaded up with fake cash at all times. You can rest assured that you can start over quickly when you make some mistakes with a demo, and this takes a huge amount of pressure off your shoulders. By contrast, it can hurt your trading trust and then nucleate your trading decisions while trading real money.
Almost every trader discovers instantly the difference in trading output on an actual account versus a demo account, as something virtually supernatural will help make money on the demo account. In fact, when trading in the real, it is common to suffer more serious drawdowns. Some even think that forex brokers can exploit the networks in real-world accounts to produce different results. But, the issue is more psychological because when we work with real cash, the mind plays emotional tricks.
The first and most important sticking point for demo vs real trading is the element of emotion. Emotions of an individual greatly affect their ability to make decisions when actual money is on the line. Demo trading is great for you because you can always get the company out or just strike when you’re in lost trade. Only click the Refresh button and your account is restored after a few losses. You can blow out many forex accounts with big profit gains on your one account, but that doesn’t mean you can replicate your one massive winning account.