Hi,
When you trade with real money, it matters. In demo account, you can’t feel the pressure of money blew up from your account. But you can get training there. You can check what you think with your demo account. But you have to be careful when trading in Live account.
I think, demo is only needed to understand how the Forex market works. And to practice a bit.
I don`t really understand why people trade on demo for months and years.
This is topic, like so many others, which will not end in a definitive answer.
As long as you understand the benefits and drawbacks with a Demo account compared to a Live account then you can use it as a tool - and a very helpful tool.
The two biggest drawbacks that people bring up with a Demo account is that of Slippage and Dealing with real money emotionally.
[B][U]Slippage[/U][/B]: If a few pips slippage is the difference between you having an edge and not having an edge then you really never had an edge in the first place - you were working on exceptionally tight margins which is ultimately unstable and not a healthy approach to take.
[B][U]Emotional Aspects of Real Money[/U][/B]: This is not a problem with Demo accounts, this is a problem with YOU. A demo account and a live account have the same price feeds. The decisions that you make based on this data is down to you and your own self-control.
As already mentioned, Demo accounts are a great tool, how you use it comes down to your own understandings of how it can potentially help you. We all have different approaches.
Jusuf, maybe you are too young and ambitious, so don’t want to waste time for learning
but demo is a nice instrument that helps to master avoiding real losses
you are brave, but dont be reckless
money can be lost in reality
Practice abit? No no no. No point practice if u don’t even know yourself what kind of trader u Wan to be and the strategy u using… U still be losing even paper money if u hv the wrong concept of forex trading. Wrong strategy. Even gv u 5 yrs u still be losing… It really not that simple… Beside understand the market how it work… U need to understand also the strategy u using. It work best with which time frame. Forex news. Forex market open n close hours. What will happen to the price when market going to open and close. It effects the price u know? U also must know your own emotion… How emotional r u? It really not tat easy. If so easy, whole world is full of millionaire. People trade on demo for month n yrs beside to know the market well. They also testing out their strategy, learning price action… their emotions to the max… Ect… Don’t rush jusuf. Take a step at a time.
Okay, maybe that would be useful to practice for some months.
But still don`t understand how people do it for years. We start learning about Forex to make money, not to sharpen useless skill for years. You can improve the skill and make money at the same time. Starting from small profits.
Half agreed, some do it for years cos due to emotions unable to control, maybe some of them already have a micro trading account which we don’t know. And they r not making v gd progress. That y they still hold on to the practice account to learn more. There such trader too. The other side is depending on yourself, that is emotion… Start with small like mirco account. But if u nv hv the skill which up to a standard don’t say about making profit, u can’t even break even on your trade even start from small account. Infact u will bust your mirco account, when u see your account balance is getting lower n lower… Your emotions control your mind, your decision, your action. In the end it become… Revange trading… U just dump whatever unit balance u hv in order to just win back that moment of losses… So every trader is dif, that depending on how u look at the picture.
So jusuf, what kind of trader u want to be? Have u already hv in mind what kind of strategy u b using? Care to share any ideal?
I don’t understand why people spend years on demo accounts? if you do that, when will you ever start earning, and if after that amount of time you haven’t been able to understand everything that goes on around you, then it’s best to forget about it all together.
Because it takes most people a number of years to learn this career to a point where they can grind a profit from the markets on a constant month by month basis. I feel there is nothing wrong with this, and from the general consensus of this forum and others it’s not an exaggeration, either.
In my view, which is quite often different to others, I see no point in going straight into a live account, or even after gaining some basic understanding either. You’re bound to lose everything at the start, that is the learning curve after all. So it’s better to do this with ‘demo money’.
As explained in [I]this post[/I], demo should be extremely similar to live - if the degree of difference is causing you to have sever variations in your results then you need to look at your trading, not the account.
Demo trading cultivates ignorance to money management rules as well as provides wrong impression about efficiency of the platform in live trading conditions. Most of the EA’s I tested on my Hotforex or Tickmill demo platforms performed much worse on live account and required basically an overhaul cuz they haven’t been adapted to slippage and other nuances at all.
Exactly, that’s the traders problem for not realizing this in the first instance - not the problem with the platform between demo and live.
If you cant control money management then you need to - again, nothing to do with the account being a demo account.
In my limited experience of demo and live (four and a half years) the only difference is platform features… There is plenty of slippage in demo, so actually if you can deal with slippage in demo mode you should also be able to do so live. I never put in money that I could not afford to lose in my live account, so when I lost it all (last October, in the Pound’s flash crash) I was upset but I had no financial downfall in my daily life: knowing this meant that I did not change my strategy because of live, real money being on the line.
Now that I am back to demo I treat the fake funds as though they were real, and care about every loss as much as if it were live. Also, I have a £50000 account, much bigger than I would have as a live account, but only trade 5k positions with small stops, so I am not making larger gains but also avoiding larger losses. As long-standing forum user GP00053 once said, it does not matter what size your account is: losing something like 10% on one trade is just as painful if you had 1000000 in equity as if you had 1000.
PMH, I’d be really interested in speaking to you about the pound flash crash that took place in October.
If you haven’t seen this, then it’s an interesting read from Bank of International Settlements.
GBPUSD Flash Crash Report 07_10_2016.pdf (548 KB)
It really bothers me that no limit of protection would have saved any traders account that evening, regardless of risking 1% of your account or less - these black swan events can can wipe out years of profitable trading, it’s a really scary thought, career ending actually if this is a full time profession.
I’ve come to the conclusion that we simply have to take this risk, and there is nothing that we can do about it. If only we could take out insurance for such events!
Thank you, RiskOn, i will take a look.
Partly because of that event I have gone back to day trading, as I then have more control over the amount of exposure in case of these events occurring, which as you say is inevitable.
I also think that people with the right capital and know-how can hedge using options, futures, etc. so that they can come out unscarred or at least moderate their losses if things go pear-shaped in directional trading.
What I found very interesting was that the BOS concluded that the flash crash was initially triggered by an algo that picked up key words from Twitter!!
Also, damage limitation was magnified by the crash happening during the Asian session with limited liquidity.
It certainly didn’t benefit anyone, and showed an unhealthy market balance, however from reading that BOS publication it made me rework on holding any positions over night UK time when holding GBP/USD
But, you may not get enough seriousness in your demo since you know that it’s all about virtual money! I see, many traders are struggling in their live trading account although they have a successful demo trading memory! That’s the reason, why traders need a decent trading skill on emotions and greed!
Flight pilots use simulators: do we think that because it is not for real they do cartwheels and crash the virtual flight for laughs?
It is entirely possible to treat demo trading seriously… It is not true that it is pointless… If you trade a strategy live after it has been successful in demo (say, over six months), then you will be more confident in making that investment. It is like starting a business by first giving your product to family and friends to test their response before investing real money selling it to the wider public as a business… It is safer to do that than opening a business without any ‘demo’ testing of your ideas.
Couldn’t agree more - the variable is most certainly the person trading the demo account.
It is yeah, but only up to a point.
Depending on the approach you’re using, demo doesn’t account for slippage, rogue price prints, bad fills, stops failing to engage or the always heavily underestimated psychological pressures placed upon a live scenario particularly when your tactics come under serious stress.
It really is a whole different ball game, regardless the account size.
If you’re mentally tough & running a large wedge distributing really small sized bets you might absorb that stress a bit better than most, but those punters are very few & far between.
Demo just sufficiently enough to become familiar with the workings of your platform then deposit funds & get your feet wet. Iron out all the niggles & quirks with your approach under live conditions punting small size so you’re not confronted with any surprises if & when you decide to scale up.
Not many punters transition comfortably or successfully from demo to live, especially when employing short term based approaches.