A forex trading demo account is often the first channel through which a potential forex trader becomes introduced to the world of currency trading. It is thus regarded as an important subject by a majority of forex brokers, with the purpose that the potential client receives as positive an impression as possible about his eventual chances of success in live online forex trading. Brokers do their best to create an unrealistic environment where risk is non-existent, capital is unlimited, and in many cases, the performance of the trading software is more stable than it is with real live trading clients.
But demo trading is in fact just a game. No money changes hands, no risk is taken, extreme strategies can be employed, and it is always possible to start all over from the beginning if things don’t go well. There could hardly be a more relaxing environment for trading forex, but that friendly atmosphere doesn’t prepare the trader for the sometimes extremely tense experience of live trading, once real money is involved. Many factors complicate trade decisions in a live account which are absent in demo trading. A person may feel his sense of self-confidence threatened as he fails to achieve the results he originally aimed at. A beginner will almost certainly become stressed and erratic as he attempts to make sense of every single movement in the market with very little background knowledge. And the inevitable losses that result will only make his initial confusion deeper and more severe as he fails to match the happy environment of demo trading to his actual experience with a live account.
Our advise to our readers is that they use demo trading only for learning the fundamentals and basics of trading such as the placement of an order, the drawing of a chart, or the meaning of a lot, pip.. It is good to use the demo account for a while for the sole purpose of getting used to the software and the broker’s capabilities. But as soon as that degree of basic understanding is attained, it is a must that a trader begins to make use of the mini-account in order to get introduced to the risk management aspect of trading. Any confidence created in demo trading is potentially dooming to traders. On the other hand, even failure with a small account can be beneficial, because after all, you will know that it is time to give up this pursuit and seek opportunities elsewhere where results can be analyzed with greater certainty. Online forex trading is not for everyone, and that many people can have fun demo trading by no means implies that the masses of live traders who fail have the same experience.
From Bryan Sayers,
ForexFraud
