I am new to Forex and currently going through the lessons in the School of Pipsology. My question is at what stage of learning should a newbie open a demo account, Should I open the demo account asap and start practicing and getting familiar with the user interface, terminology and the process of placing orders etc etc or wait until I have completed all 334 lessons and then open a demo account.
I am a programmer by profession so I do understand the concept of developing a skill. In programming its adequate to read basics and get started with actual development asap as that is the best way to learna nd make progress. Along the way you can read up on algortihms, data structures and other theoretical stuff which will defintely improve your skills but it is the hands on practice that makes the real difference. Does this analogy hold true for Forex Trading as well or is it better to read up as much as possible and only then start with demo treading and then go live.
I have also read some folks in the forums advise against spending too much time in demo accounts. Their advise is to get comfortable with basic functionality and then start live trading, which seems contrary to what I have read in the School of Pipsology.
I would appreciate any advice and opinions from experienced Forex Traders. Thanks
Some traders believe using a demo account is a waste of time. That is not true. It is not just about learning the functionalities, it is also about understanding what drives the market and building self confident. Can you manage funds on a demo account without blowing it away withing one month? Can you manage it with positive results for 3 to 4 months? If yes, that is a confidence booster and it will show that you ready to deal with profit and loss.
However, in the real account, your money is involved and it takes your emotions to another level.
My advice would be to use a demo account for 3 to 4 months with positive result, then a live account and practice with 0.01 lot size on a micro account. I do use Forexchief micro account and minimum is $50. You can also use their bonus, all for learning purpose ONLY. When you want to make substantial amount from Forex, you need larger capital. But focus on learning for now.
There is no reason why one shouldn’t open a demo account immediately. It is far more efficient to practice simultaneously with learning than trying to first just learn the theory before putting it into practice.
A more appropriate question would be how one should use a demo account. Apart from familiarising with the workstation layout and features one also practices order entries/exits and position management.
But perhaps the most important feature of a demo account is the ability to experiment and develop a suitable trading style and strategy - and all without having to worry about the possible losses.
It should NOT be used simply as some kind of computer game where one can chuck around huge positions just to see the big paper profits! It is a serious tool with the purpose of preparing you for the real thing.
That is exactly right. Your demo account will help you develop your trading skills and become familiar with how markets move and how to manage your risk exposure. It is a good idea to start with some simple techniques and systematically build on it. You will soon learn what is useful, what is useless, what is duplicating, what is the most appropriate style of trading and what timeframes suit your circumstances, etc.
But feel free to boldly experiment and try out many approaches, that way you will gradually home in on what works for you. Just try to be systematic and give each trial sufficient time to provide the feedback you are looking for. It is not very productive to just jump from one thing to another as soon as it looks negative.
Personally, I think there are two stages here. The first is the elementary stage of getting comfortable with the functionality, but then the second stage is arriving at a trading strategy that you are both comfortable and confident with. i.e. it is showing profits in the demo stage.
But there are many complex issues that arise as soon as you actually go live and are seeing real money coming and going. These, mainly psychological, issues cannot be practiced on a demo account. But a live account need only expose you to minor risks if you use microlots.
In short, if a person has basic knowledge about Forex trading and know what is the meaning of fundamental terminologies then he is qualified to open demo account.
Using a demo account is not wasting of time because this is the best way to minimize loss as well as get to know how to make perfect trading strategies with ZERO Loss!
Trading is a skill based endeavor, just like learning a computer programming language. The analogy you’ve given holds true indeed. Open up a demo account as soon as you can. I suggest Oanda since their demo account behaves exactly the same as their live accounts. A demo account will allow you to implement what you learn at BP school and try things out in real time. It will accelerate your learning,
I don’t know if you’re are a front end or back end programmer but let’s say that you’re learning the Python programming language. You can read about list comprehensions or generators or closures but until you actually code these constructs you will have no real understanding of how to use them. Similarly, practice is a necessary and required component to advance your trading prowess.
I’m one of those who advises moving to a live account quickly. It gets you to think about risk and account management at an early stage. However, if you have the capacity to truly consider a demo account as a real account and to treat it the same then keep using the demo account until you have a profitable strategy built and then transition to a real account.
Again, I would recommend Oanda for this purpose since they allow you to trade in units smaller than a micro lot. You can literally trade 1 unit if you like. This helps with risk management and it allows you to concentrate on how to build positive pips before you increase your lot size and therefore your risk.
Thank you all for your detailed and thoughtful advise. It is really helpful. I have opened an account with OANDA and for now will be learning the UI and just getting familiar with the basics. I am not at the stage where I can develop my own strategy. So pretty much going through SoP and practice on OANDA, and hopefully one day will use a live account. Also like the idea of opening a live account and trading in small units just to get used to the feeling of trading live. Thanks once again.
I love that you suggested using Oanda, or any regulated broker for that matter. I’m thinking about switching my broker to Oanda, since they don’t allow you to over-leverage and it can help with my risk management skills. It can be a good thing if you know what you’re doing because HUGE profits can be made on a small account, but can also kill your account if you make too many mistakes. I suggest any new trader to make sure they are with a “regulated” broker.
It’s really not depend on anything but some unique experience and that’s really it anyway for whatever reason being there. How else you should make it ? Find reliable broker and make account here after finishing baby pips school, can you make it ?
