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Demo or Real account – is the question

Often traders/beginners tend to open a Demo account for „testing“ purposes. Whether to test their own abilities and/or to „practice“, or to test trading conditions offered by the chosen Broker.


Is it enough to practice only on a Demo account? Will that help you to become a successful trader, good enough to be profitable and profit on your first live trade? No, it's not. Demo account is a good way to get the feeling of the real market, but in Demo trading there are no emotions involved. You trade with a virtual money. Demo account should only serve you for building up your trading strategy, take it to a point where you are profitable for a consistent time 1 to 2 months or so, and then it's time to move onto the Live account. On the other hand, Demo accounts are good to teach you that you should never involve emotions in your trading, we all know it is the most common reason of making rushed decisions and risk your investment. Whilst you are holding onto the Demo account consider to take other steps as well towards education, which will also help you to make informed decisions. A lot of brokers offer free education that come through tools, seminars, interactive webinars where you can ask the analyst whatever you want. And in this timeframe you had more than enough time to test trading circumstances as well.


So, since we do not involve emotions with Demo trading, maybe it's time for you to move to live trading. Do this only if you have the money you are willing to risk and expose to the real market. You have to be prepared that on Live account you will lose real money, even if you have been trading on Demo accounts successfully for a longer period, there might be a possibility you will lose your first live trade. Unless you take some steps to prevent this, such as risk management, learning to shut your emotions down, and always, always risk only that you are willing to lose if the market moves against you, because it will. But the pros of moving to Live account is all the tools you are able to use that it comes with, you can still be able to test the real feel of the market by trading with baby steps. Some of the educational and helping tools might require you to deposit a certain amount of funds to your account. But, that does not mean you are exposing it to any risk. You do not have to place all the funds at once on your trading account, rather transfer periodically to top up your free margin whilst your exposing no more then 40-50% of all your funds to the market. The rest can remain on your wallet just in case if you need to react quickly.


If you are not sure are you ready for Live account and ditch Demo trading, maybe you should try to have both. Training in a demo environment still helps you adapt more quickly according to the constantly changing environments in the market. But as it's not the best indicator of how would you perform in a real time trading environment consider to have a Live one as well. If you use only Demo for a long time, by the time you get to feel the real market your risking becoming overconfident as on Demo you manage to close out big trades at a profit. You hold on Demo large losing trades which you would never be able to float on a Real account with your own capital instead of the virtual money, so that is another reason for having a Live account where you can actually see when the trend may be correcting, therefore you can exit or reenter at a more favorable price.

Ildiko Gyimesi
Business Development Executive
HotForex

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument.

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