Forex brokers offer demo accounts to let you have a taste of trading currencies without investment risk. It enables you to place mock trades using virtual money in their trading platforms.
If you’re a beginner, a demo account could be the greatest tool to learn the ins and outs of Forex trading quickly. But this tool should be used with due diligence, otherwise, it may prove to be costly to your trading career.
Truths About Demo Trading
Demo trading allows you to get familiar with the various aspects of trading. You have everything to gain from using demo accounts for as long as you are choosing and utilizing these accounts the right way.
You must be reminded that demo accounts are just a simulation of the real thing. Your success in demo trading cannot be transferred to real-life trading.
What are the differences that drive the opposite results that traders see in demo trading and real trading?
Greed and Fear
What most first time traders don’t realize is that demo accounts teach them to be more greedy. Since they are not trading real money, they are more prone to greed-driven decisions.
With a demo account, you are able to have a sizable trading capital. You may think that you have grasped the right formula because of the big sums you have in a demo account, but what it fails to empower is a sense of fear. Because you are managing fake money, you tend to go on a trading spree.
You are not pressured to make logical trades because the fear of losing real money is not present. By the time you jump into real trading, you have this illusion that you can deal with real money the way you dealt with it in demo trading.
The Real Picture
Demo accounts have limitations. You cannot accurately predict whether you can be successful trading with real money.
Even with a strong presence of fundamental logic and technical indicators, human psychology swiftly distorts these things. If you would look at Forex trading closely, it is dominated not by logic, but by psychology.
Act With Due Diligence
One of the most important things you should learn is not to be passive with the tools and emotions that are involved in trading.
Be mindful of your emotions and never let it dominate your trading. Also, learn more about the tools you’re using and see if they remain useful at the present time. Learning all these things, without a doubt, will lead you to better and more profitable trading decisions.
Read also: 3 Disadvantages of Using Robo-advisors