Conventional advice in the currency market states that as a novice you should only trade a demo account until you become comfortable with the whole trading process. I couldn’t disagree more. First of all you will never “get comfortable with the process.” A trading life, to paraphrase Thomas Hobbes, is “nasty, brutish and short.” Markets are never predictable and even lifelong veterans of speculation are constantly challenged by the game. The best way to learn how to trade is to just dive right in and practice over and over and over again- just like with every other endeavor in life
The demo account is useful only for a few distinct tasks.
- Learn how to place a trade.
- Learn how to attach a stop and a limit order.
- Learn how to configure charts and news.
- Learn how to read the trade settlement report.
That’s it. Once you are familiar with the mechanics of the platform there is no more need for a demo.
Many trading coaches argue that by using a demo you can test out a variety of strategies without risking capital, but that is bogus advice. The very essence of trading is not to become adroit at a single strategy whose value will dissipate over time but to master the art of taking on risk – the very thing that demo accounts avoid. That’s the reason so many demo traders can run $50,000 demo dollars to $1 million but fail miserably when they start trading $5,000 dollars of real money.
Start with small account, trade mini lots and learn the trading game with real money. There is no glory in being a demo billionaire.
As a demo trader here is what you will never experience. You’ll never experience the dealer slowing down the order entry platform at time of maximum volatility just when you need to enter or exit the market the most. You’ll never experience spreads suddenly widening just as your take profit target is about to be hit. You’ll never experience a platform outage, or the very uncomfortable “deer in the headlights” feeling that comes from selling a currency pair when you meant to buy it. In short, trading a demo has nothing to do with real life trading. It’s the differences between practicing basketball free throws in a quiet gym versus trying to sink a game winning basket as thousands of rabid fans scream at the top of their lungs and sway back and forth trying to make you miss.