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Demo Trading AccountsOne of the most hotly debated subjects in regards to learning how to trade is whether aspiring traders should start with a demo trading account or go straight on to the real thing. Critics of the various Forex demonstration trading platforms often argue that demo trading is in reality so different from the real thing that all demo trading accounts do in practice is give newbie's and wannabe traders an unrealistic picture of what trading is actually like and how difficult it really is. While I generally do agree that trading using a demonstration/practice trading account is fairly different to trading live, I do believe that starting with a demo account is probably the best route for aspiring traders to take. There are a number of differences between demo trading and trading live such as order execution speed, slippage, etc which does make a big difference if one is a short-term scalper; but for most trading strategies the biggest differences between demo and live trading accounts are psychological in nature. The twin emotions of greed and fear often cause inexperienced traders (and sometimes experienced traders too for that matter) to fail to stick to their trading plan and make other irrational trading decisions such as doubling up to chase losses etc... So in short, other than the effect that trading has on one psychologically there is very little difference between trading with a live account and trading with a demo account in my opinion, unless of course you're looking to scalp a few pips or you have chosen a real bucketshop of a broker. Of course, many people will point out that for most people psychology is the biggest part of trading and that since demonstration accounts don't come with all the usual emotions one has when they're trading with real money demo accounts should be avoided for that reason alone. But to those people I would ask: what then is the alternative? What do you recommend? That aspiring traders immediately start trading with a live account and quickly lose the lot? No doubt there would be some very valuable lessons learnt from doing this, but it does seem like a rather harsh way to learn to me. My first experience in trading involved me diving into a live spread betting account before I'd even been able to make money paper trading with a demo account. Needless to say I lost my entire deposit within several hours, topped my account up with some more money and promptly lost that too. I would strongly recommend that you don't do this, it's far better to learn from someone else's mistakes if you can than from your own. I would recommend that anyone aspiring to become an independent Forex trader starts with a demo account and doesn't even begin to risk real money until they have been profitable for a considerable amount of time in their practice trading account. If you cannot trade profitably with a practice account there is no way you will manage to trade profitably with real money. Success with demo trading however does not guarantee you will be successful with trading with real money. The jump from trading a practice demo account to trading a live trading account is a very big one and most people experience strong feelings of fear and greed when they do this for the first time. It has been said before that the best way for traders to control fear is by controlling their greed – control the greed and the fear will control itself. The way to control greed is to trade with what is, to you, a very small amount of money that you can afford to lose. Therefore, when you feel it is time to make the jump from a demo account to a live account I would strongly recommend that you start your live trading with a small amount of money. If you open a demo trading account with DeltaStock you have the chance to win one of ten cash prizes monthly, those who are interested can open a demo trading account with DeltaStock here. Good luck. |
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