From Demo Account to Live Trading On the Foreign Exchange Market
When new traders enter the foreign exchange marketarena it is advised they begin their forex experience on a demo account. While this account allows one to practice trading skills there are many traders who still face challenges when moving to a forex live account.
The benefits of a demo trading account
Many new traders question why they should use a demo account at all. Demo accounts offer new traders a place to practice their skills without losing money. These accounts work in the same manner as live accounts meaning you can use leverage, place orders and test any theory you have. You should only consider using a live account when you are confident that your strategy works and you have found the trading style that suits you.
Moving across to live foreign exchange market trading
When you switch from the demo account to a live account you should do this in stages. Firstly, you should move from a demo account to a micro account. Then you can upgrade to a mini account before finally setting up a regular account. The steps are essential because of the differences between demo and live forex accounts. The majority of new traders lose money when they first switch because of the differences between the accounts. However, having a micro account limits the amount you lose. This is due to the small lot sizes micro accounts are able to trade.
Forex trading psychology
Demo accounts allow traders a certain level of freedom when it comes to their emotions. As the money is not real there is no harm in being emotional when you trade. Greater risks are also taken when trading on a demo account because of the virtual currency. These risks are often transferred to the live account and create serious problems. With a live account you cannot be as relaxed with your controls because you stand to lose real money. Of course, being overly cautious with trades can lead to low profits so it is important that a trader find the best balance.
Finding this balance should be done when using the micro account. As you have tested your strategies on the demo account you should be confident that they work. Sticking to the plans you have is the only way you can successfully switch from demo accounts to forex live accounts.
The differences between forex demo and forex live accounts
Firstly, trades made on a demo account are executed much faster than on a live account. The reason for this is that the demo account is not using actual money but rather virtual currency. Traders lose money with this as the trend changes while they wait for their trade to be fulfilled.
Secondly, the trading platform may differ between the demo and live account. The differences will not be drastic but they are large enough to cause issues. Traders have to familiarise themselves with the platform changes before they start a trade.