Demo accounts...Do you really think you have any idea?

Beginner Questions
1

Hi all,

I’m curious on how long you have all traded demo accounts for, if at all, before taking the decision to jump into a live account and begin the fun of [I]real[/I] emotional trading.

Allot of people on baby pips who I have talked to like to think that there demo experience is sufficient, and that they have covered every base possible, :slight_smile:

It’s a nice thought to think that this is even remotely true, even if I may so say myself. I’m a strong believer that demo trading is required, the fact that I spent two years doing so myself before depositing real cash funds should be adequate proof.

So what lessons have you gathered from demo trading, and what immediate differences did you have to overcome from demo Vs Real account trading.

Please share your ideas from past experiences, as I have a bad feeling that many ‘new traders’ expect real cash trading to mirror that of their demo performance. This is a subject which isn’t really touched upon until its too late…

[B]We have all seen the new thread appear in the baby pips forum such as this
"help! Why is my real account nothing like my demo account"[/B]

Be honest as I think we could all do with a little reality check of just how different a real account is from that of play money. I always used to like the Monopoly board game, that is until I realised in real life you couldn’t use play money to purchase a house on Canary Wharf! :18:

James

2

The primary difference is the fear and greed that comes into play when real money is on the line…no matter how little. Even if you only have $0.50 at risk, I have found that my whole psychology changes. Depending on the person, it can be a HUGE difference in results. However, if you have followed the progression of backtesting --> demo --> live account, then it should give you a little more confidence when real money is at risk.

3

As a newbie with my demo account, I made several trades and made a profit on a few, got my account up by $80 for about 20 mins work, feeling pretty smug and thinking I was starting to understand things, I looked at another pair and jumped in quickly, unfortunately I went long the wrong way doh! Stupid mistake to make, i am so glad it’s on a demo, better to loose virtual money than the real stuff.

4

I think one should make the jump to a live account as soon as possible.

BUT!!!..

Use the same money management principles with the amount you are going to open an account with.

Say your initial account is going to be $1,000.00.

Use 2% of that, and open a $20.00 Qanda account where you can trade fractions of a cent. If you can keep that at break even for a bit, and even add to it a bit, then add more. But don’t dump the whole 1k in, and expect miracles. Keep the rest of it out of the account until you can at least break even consistently.

There’s no better teacher than consequences for an irresponsible trade. There ARE none in a demo. No price for failure will lead to bad management when the time comes on a live account.

5

I just switched over from demo to live a few days ago. Even though my account is less than 5% of what I would invest in forex. I feel the trades much more and I study my trades much more than in demo. I feel that the pressure from real money makes it a much better environment to learn. Demo to get the basics of your platform and test out your system then go live. I traded demo forward and backtested while in lulls of trading. Moving to live … There’s nothing like it

6

Demo trading is like driving a car on a computer game and live trading is like driving a real car on the road with real traffic where you have follow some rules otherwise you know what happens…

As we are on babypips so one should take baby steps before starting to run.

7

It’s all a bit blurry now, it’s a while ago, I went from demo to a live account with too much money, then traded with token amounts before building up, but I tell you when you go out and buy something with your ‘hard earned’ forex money, when you know that you are consistent and then you realise, hey I can really live on this eventually, a certain reality hits you, and in my case my trading improved, I think it was that real connection between what you do on the screen and that cold hard cash that you’ve spent 10,000 hours in front of your charts that you can now reap the rewards of.

8

I never traded demo at all. I figured that I would see it too much as a computer game - no real consequences so I would not behave in demo as I would in real life. In a computer game I can happily rush into a room full of gun-toting enemies holding only a crowbar and have a go at them, in a computer game I will see if I can take a corner at 150mph etc etc. In real life I would find a quiet corner and call the cavalry, or see how 80mph worked out first. Same with demo - if I were to take two losses back to back in demo, I would probably still take the next clean setup even if it were only a few minutes later. That would probably be the right call, and overall I would be profitable. However, in real life, back to back losses still makes me step away from the screen for a bit and take a deep breath - and I know that my strategy works overall.

I figured that psychology/consequences/call it what you will is central to Forex trading and not represented in demo, so I did not trade demo at all. I am still here, I trade full time, and never blew an account. So while demo works well for many, I don’t think that it is an essential part of the process. I know other traders who skipped it, too, for similar reasons.

I also think that going live with too small a financial risk compared with intended account size is effectively the same as demo, so is sometimes not the solution some assume. If a new trader has £50,000 to invest, starting out risking pennies per trade is not really going to give any more sense of pressure or consequences than trading demo, in my opinion. If the money doesn’t mean anything, to me that is still demo.

Please understand, this is not me arguing against demo or low-risk trading per se, I am simply saying that they are not for everybody, and that I skipped both - not through extreme confidence, I just feel that I learn better when the training matches the end challenge as closely as possible. My initial account size was, I think, £2000, which I quickly increased to £5000 as that opened up more trading opportunities. I risked 1% per trade then, and I do now.

ST

9

Just moments ago I found myself extremely glad I’m on a demo account.

Had a stoploss of 10, trade suddenly rocketing off, going my way… then I get stopped out as the spread went to 30 pips suddenly. At least, that’s what I think happened.

There’s certainly something to be said for learning the ‘mechanics’ of all this before going live with real money… this would have been not just “painful” but also a very expensive lesson to learn. Yes I did not realise that broker spreads can suddenly go to 30 pips without warning when the price takes off. Guess I’m a tiny bit more knowledgeable now… but this is a clear, well illuminated sign I’m not ready to go live yet.

10

For me, 10 pips is a little too tight as a Stop, but the odd backward step does not mean that you are not ready to go live. I had a losing trade overnight, can see the things I could have done differently, but it goes with the territory. Unfortunately!

11

I’d be interested to know what financial instrument you were backing for the spread to jump to 30 pips…sounds rather insane to me. Was is an exotic currency pair by any chance? Since I only trade in GBP/USD and EUR/USD I would be very surprised to see such a jump in spread, anything above 3.5pips would sound the alarm bells in my mind.

12

It was GBPUSD on Oanda. I went to go look at their recent currency spreads page and it is not there yet. I suppose it does not matter as I was stoplossed “too tight” I guess and they do report spreads of 20, 25 pips now and then. When it happened, price was really moving down fast.

Basically I made a really noob mistake that with some retrospect should have been an obvious risk factor. Yes I was expecting big moves but did not have a stoploss big enough to absorb a sudden monster spread.

What was even worse, my original stoploss was on the wrong side of breakeven when it happened so I got hit for that… yes, fellow new forex people, you can have a trade dramatically take off in your profit direction and still lose! Because of the suddenly widened spread thing. At least, I’m pretty sure that’s what happened.

From now on I’m preparing for random, tsunami~like spread changes during volatile markets, and carrying an inflatable boat if I go within five miles of the coast. ONE NEVER KNOWS! At least, that’s how I am reacting today… :slight_smile:

I wonder what other surprises await… in any case, I was also ‘very sure’ that price was going to go lower when it rebounded upward… then ‘sure’ again when it didn’t. And I kept at it with trades that were 1.2% of the demo account, and big stoplosses. Highly, highly educational… as opposed to profitable.

This is one of those “pick yourself up off the floor, and grimly determine to get good at this” moments. I shall get good at this. I shall stick with it. I shall be a good trader. There is no excuse not to be, given that there are no deadlines, no pressing financial concerns and no compelling reason to repeat mistakes indefinitely.

But today is not yet that day. I am not a good trader yet.

Perhaps in a while it will be time for ‘penny per pip’ live trading but only when all the possible noob mistakes are excised. I’ve even gone so far as to remove several buttons on the java applet so I don’t accidentally press the wrong pair when making a trade. Yes, I’ve made that mistake and am very glad it was just practise…

13

I wanted to let you know that yes, definitely, Oanda does take the GBP/USD spread up to 30. Usually you will see this spread on UK economic releases (important ones) and something 20 or under for US releases. I hate it, but I’ve just accepted it because I do like Oanda overall as a broker. That said, I was once slipped -80 pips on a UK release on a previous broker, so maybe just maybe, that’s the reason they have these wide spreads. I’ve never seen Oanda slip more than a pip or two, and that’s a bloody rarity in itself!

14

hi
i am a newbie and want to know, i want to open a demo account which and with who shall i go for, too many out there and hard to decide,please advice from your experience of usage.
i.e name of the website/companies please.

15

demo accounts are free try a bunch of different platforms. As for live accounts do a test deposit a few little trades to see how it goes and a withdraw. you might be out a few bucks on some trades and some bank fees. You can find scary bad reviews for all brokers. If you set up a live test account test the customer service also with a few emails or call.