Demo AccountCan You Really Count On The Demo Account?
Before you get your hands dirty in the world of trading, it is important you understand the nuances of it and a demo account helps you do just that.
But be careful!
“To trust too much on a demo account can be dangerous!”
Demo accounts work on the “Learn Before You Earn” motto, which helps beginners to get a hold of the market before investing actual money in the same.
Demo accounts are almost similar to actual trading platforms except for the fact that the money is not real and it is usually termed as virtual money.
Demo accounts are apt for traders who wish to test theirstrategies and plans in real time without having to risk their own money.
These accounts help to enhance one’s trading skills and once a trader gains confidence over his expertise, he/she can ditch the demo account and start investing actual trade capital and put his/her skills to play.
Why is It Essential to Have A Trading Demo Account?
Demo accounts play a critical role in helping you to gain familiarity over your trading platform.
It helps people to overcome the dilemma if strategies which are chalked out on paper, actually work in reality.
Imagine a situation where your strategy actually does well on a forex demo account, wouldn’t you be tempted and pumped up to actually put the same strategy to test in reality?
This is the positive thing which playing around with a demo account actually induces into your trading career.
What A Demo Account Does Not Help You With?
It is important to understand the extent to which you should rely upon and believe your demo account. Imagine a situation where you tend to chalk out a successful strategy which also seems to be doing well in your demo account.
We as humans tend to get a tad too carried away with the prospect of winning and hence, we tend to invest even more real capital in the same strategy.
Under such a circumstance, if your strategy fails to see the same extent of success in real trading, due to a normal negative period , your losses will be accumulated.
A demo account should essentially help you to find out how trades work and learn the techniques and it should not be used to determine how much you could probably make out of the trading.
In fact those who tend to imagine the profit they can achieve in the future, based on the results of the demo account, are always very disappointed.
the Analyst's answerJean Grossett - Financial analyst
There are several different factors from a demo account to a real one.
The former is purely technical of platforms, namely demo openings are opened quickly while in the real platforms several seconds are increasingly lost before they activates, or sometimes in moments of high volatility they block openings warning that the price has changed a lot. This fact influences the results a lot.
The other difference is psychological, that is, working with fake money allows us to be emotionally detached and therefore very calm, while working with real money will put us in a pressure condition that inevitably leads us to do even trivial errors, which will condition a lot our results