Not just beginners. Demo trading or paper trading also plays a crucial role for experienced professionals when testing out new theories or ideas.
Perhaps one of the few careers where you can test an approach with zero risk and reliable results. Personally I am a huge advocate of exploiting demo accounts. At the end of the day if you can control yourself then the difference between demo and live is almost symmetrical.
I disagree about two things - that a demo account is enough for a trader to learn how to trade, as some things can only be learned on a live account , and that there is no difference between demo and live accounts, as requoting and slippage donāt occur on demo accounts but they do occur on live ones.
This is very true, and something that needs to be given a little thought.
But having said that, if a few pips slippage is the difference between you having an edge and not having an edge; did you really have a sustainable edge after all 
Agreed! Though there are differences between demo and live but we can scrape off the importance having a demo account. Itās an important tool where you can enhance your trading knowledge and practice your trading strategy well before going live.
Hi,
When you trade with real money, it matters. In demo account, you canāt 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 donāt 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 donāt even know yourself what kind of trader u Wan to be and the strategy u usingā¦ 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 losingā¦ It really not that simpleā¦ Beside understand the market how it workā¦ 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 emotionā¦ 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 actionā¦ their emotions to the maxā¦ Ectā¦ Donāt 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 donāt 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 emotionā¦ Start with small like mirco account. But if u nv hv the skill which up to a standard donāt say about making profit, u canāt 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 lowerā¦ Your emotions control your mind, your decision, your action. In the end it becomeā¦ Revange tradingā¦ U just dump whatever unit balance u hv in order to just win back that moment of lossesā¦ 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 donāt 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 havenāt been able to understand everything that goes on around you, then itās 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 itās 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. Youāre bound to lose everything at the start, that is the learning curve after all. So itās better to do this with ādemo moneyā.
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 EAās I tested on my Hotforex or Tickmill demo platforms performed much worse on live account and required basically an overhaul cuz they havenāt been adapted to slippage and other nuances at all.
Exactly, thatās 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 featuresā¦ 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 Poundās 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 Ā£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, Iād be really interested in speaking to you about the pound flash crash that took place in October.
If you havenāt seen this, then itās 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, itās a really scary thought, career ending actually if this is a full time profession.
Iāve 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 didnāt 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