The Importance of Demo Trading and Your Demo Account
I see that some traders believe that demo trading is not a good practice because you know that you are trading with the demo money, and so you don’t trade with discipline. They believe demo trading causes the novice traders not to learn to trade with discipline, and this will be ended to failure finally.
When you know you are not trading with your real money, then you don’t care to lose, and so you can make all the possible mistakes, like taking positions with any trade setup (either weak or strong) you see, taking positions while there is no trade setup, over-trading and… . It will be a disaster if these bad actions become a habit in you.
This is true only when you are not a serious learner and you are practicing Forex just to see what it is. So you open a demo account and you take some positions to see how it works. You don’t care if you lose.
However, when you are serious to become a professional and full time-trader, and when you want to make a living through trading, then you should behave completely different.
Before you open a demo account and start demo trading, first you should learn everything you need to know. I have explained this in details here: Do You Think You Are on The Right Track to Become a Profitable Trader?
First complete your knowledge and then start demo trading. Spend enough time to follow the videos and articles. If you start demo trading while you are not ready yet, you will only make yourself confused, frustrated and disappointed. Forex makes money. Do not let your mistakes make you think that you can not make money through Forex.
Now let’s say you have learned everything you need to learn, and now you are ready to gain experience through demo-trading. This is a very important stage that if you don’t pass properly, you will not become successful with live trading.
Aren’t you here to make money through forex trading finally? If the answer is yes, then you should pass all the stages very carefully and patiently, otherwise you will not get any good result. I can not emphasize on this more. It is very important.
Make sure to read the below articles carefully:
- How To Become a Successful Forex Trader
- Are You Still Looking for the Forex Holy Grail?
- Do You Think You Are on The Right Track to Become a Profitable Trader?
There are a few things about demo-trading I have to emphasize on:
1. Take the demo trading as serious as possible.
Forget that it is the demo money and nothing happens if you lose. You can blow up your live account as easy as you blow up a demo account. So, when you open a demo account, forget that it is a “demo” account. Treat it as a live account and your real money. Do you like to lose money with your live account so easily? If not, then do not lose with your demo account so easily too.
The discipline you need for Forex trading is something that you have to “build” in yourself. You have to “build” it on your own. And demo-trading is the foundation of your “Discipline Building”. If you trade carelessly with your demo account, you will do the same with your live account too. If you take positions with your demo account while there is no strong trade setup, you will do the same with your live account too. If you over-trade with your demo account, it becomes a habit, and you will do the same with your live account too. If you…
Conversely, if you forget that you are “demo” trading, and you take your demo account as serious as your live account and real money, and you wait for the strong setups only, and you do not over-trade and you don’t take too much risk, and you set the stop loss and target properly, and you care about the losses as you care about losing with your real money, then the discipline you need to have to make money through Forex trading, will be built and matured in you, and you will be successful with your live account definitely.
2. Make sure to keep on demo trading and not to open a live account, as long as you have not been able to repeat your success with your demo account.
Does it make sense to open a live account and trade with the real money while you have not become able to make money with the demo account yet? If it doesn’t make sense, why are you trading with a live account then? You think live trading is different? It is not. When you lose with the demo account, you lose with the live account too. If you are not knowledgeable, experienced and disciplined enough to make profit with the demo account, you will not make profit with the live account too.
You will always have time to open a live account and start live trading. Don’t do it when you are not ready yet.
3. Your demo account size has to be the same as your live account size. I mean if you are supposed to open a $1000 live account in future, then practice with a $1000 demo account too, and do not open a $100,000 demo account for example. This helps you behave with your demo account exactly as your live account. This helps you take your demo account serious.
Keep in your mind that your demo account has to be treated exactly as your live account. Although you open a demo account for free, but it is not “free” in reality. You are spending your time on it. You are building your experience and discipline with it. So not only it is not free, but it is too expensive and valuable. It is the “foundation” of your business.