Forex Basics

How (and Why) to Take your Forex Demo Account Seriously

For any aspiring forex trader, a demo account is one of the best hands-on tools available. These accounts allow one to really become acquainted with the market and their chosen trading platform in the beginning, and can even be used to test strategies later on. While demo accounts can provide a good idea of whether one is ready to open a real account or give a general idea of how well a new strategy will work, they do come with one major fault in that some people just don’t take them seriously. After all, you’re only trading with fake money, so the psychological aspects that come up when real money is on the line are absent.

It’s also easy to become disillusioned with trading on the demo account after some time, as some traders begin to question whether it is even worth their time. It’s important to remember that demo accounts are one of the best tools available, as long as they are taken seriously. 

The first thing you can do to gain every potential reward from your demo account is to make yourself feel the pain when you lose money. As we mentioned, one of the downfalls of the demo is that there is no real money on the line and the trader has nothing at stake. It’s easy to open a new demo if you blow your old one or to ask support to top up the account, whereas the same can’t be said when you’re trading with your real hard-earned money. If you want to make things feel more realistic, try introducing real-world punishments for mistakes or losses taken on your demo account.

If you deviate from your trading plan, force yourself to do 25 push-ups. If you take a loss that could have been avoided, make yourself do a chore that you’re dreading. Or you could take things away from yourself, like dessert. If you know that there are going to be real consequences, your mind will be more focused on your demo account and you will put in every effort, just as you would on a live account.

Another suggestion to help yourself take your demo account seriously is to grade yourself. For some, seeing a high grade can make them feel more motivated and successful. Your grade also gives a general impression of how you’re doing, as you obviously need improvement if you’re coming out with a low grade. You can use a scale of 1 to 10 or go with a scale from 0 to 100, whichever works best for you personally.

When grading yourself, you’ll want to come up with your own system to base the final grade off to avoid self-biased results. Adhering to your trading strategy, managing risk, missed trades, the number of trades you’ve taken, and profits/losses are a few examples of things you could critique. 

Although demo accounts offer many benefits, some traders have issues taking their demo trading seriously because there isn’t any real money at stake. Our advice is to introduce real punishments when you have bad demo results and to grade yourself so that you can keep track of your progress. Knowing that you’ll have to clean your house or forgo that piece of cake you’ve been wanting for dessert can be motivating enough to help you trade more seriously while having a final grade to look at will give you a general idea of how your doing, as well as something you can work to improve. If you learn to take your demo account seriously, you’ll reap the many benefits offered by the free simulation tool.

Forex Psychology

Psychological Differences Between Demo and Live Trading

When you start out trading, often the first bit of advice that is given to you is to use a demo account, keep using a demo account until you perfect your strategy. While this isn’t necessarily bad advice, it is, however, advice that can lead you into a sense of false confidence. Yes, we agree that using a demo account is great, to begin with, however, there are a few things that you should keep in mind for when you move over to a live account.

Reduction in Emotion

When you are trading on a demo account, there is nothing to lose, which means all of the stress that comes with a loss is not there, make a loss and you shrug it off, blow the account, just open up a new one and all that money is back. This isn’t how it will work on a real account, each and every loss is you losing something of yours, this can be devastating to some, we have seen people lost thousands, others have lost $10 yet it can have the same psychological effect on someone and can be hard to take. 

These negatives can cause a snowball effect and can cause some people to chase losses which can lead to more losses and even account closure and debts. It can also work for winning, your first winning trade on a demo account feels ok, but nothing special when you compare it to your first winning trade on a live account, it is a fantastic feeling, just don’t let it get into your head, stick to the strategy and you will have many more wins, don’t start trading just because you are on a high of the previous win.

The Need for Greed

If you were to ask someone if they are a greedy person, they will 90% of the time say no, watching someone trade is a good way to see the truth. We touched briefly on it in the previous post, but when you make a winning trade, that is actual money coming into your account, real money that you can withdraw and spend, it feels great, but I want more. Maybe I could get more by putting in trade here or there, obviously, these are not in line with my strategy but they could make me more money. My trade is going the wrong way, let me just move my stop loss further down so it doesn’t close because it will definitely turn. My trade is going the right way, let me move my take profit level higher so I can make a bit extra.

These are all things that we have done on a live account, but never ever think of doing it on a demo account, simply because we can make some money. These are not good habits to have, you set these initial trades or limits for a reason, stick with them, do not change them just because you think you could squeeze a little extra out of the markets, the markets will not be afraid to take it all back from you.

Risk Elimination

This works in a similar way to the emotions, there is no risk when trading on a demo account if you lose, you aren’t losing anything, but in the same way, if you win, you aren’t actually winning anything (apart from the knowledge of course). On a live account, seeing your balance going up or down can have a huge psychological impact, when it goes up, you are full of confidence and on a high, but when it goes down, it can really impact on your confidence and desire to continue learning.

So how do you avoid these sorts of things? It isn’t easy, any professional trader will tell you that, the hardest part of trading is taking out the emotion and sticking to your strategy, especially when things are starting to go wrong. Ensure that you are sticking to your plan, you created a strategy on the demo account, stick to the exact same on a live account, think of it as a process and try not to look at the profits, you could even hide them on your trading platform. 

Ensure that you are using a trading journal, both on the demo account and on the live account, this way you will continue to use what is working and will be able to see if you are changing anything fro the demo account, allowing you to stop and move back towards your strategy.

It is a big change going from demo to live trading, but ensuring that you are fully prepared and taking your time not to rush into things are the first steps in becoming a successful live trader.

Beginners Forex Education Forex Basics

Practice Makes Habits, Not Perfection

The phrase that you most likely would have heard plenty of times throughout your life is that practice makes perfect, but we are here to tell you that this is not the case, especially when it comes to trading when you can never actually be perfect, you may have a perfect trade every now and then, but you overall as a trader will never be perfect. This is not to say that you can’t be great and that you can’t be consistently profitable, of course, you can. What war referring to is the definition of percent: “having all the required or desirable elements, qualities, or characteristics; as good as it is possible to be.” No one can be perfect, there will always be things to improve on and there will be mistakes being made.

This is all very normal, so instead of looking to become perfect, why not look to develop habits, habits that make things easier, habits that ensure that you are doing things the right way, or at least the way that you are meant to bad on your strategies and plans. What we need to be careful of though, is developing habits which do not help us, if we are consistently doing something wrong then it is not going to be good for our overall trading is it? Programming your mind into doing something wrong can make it very hard to change it in the future, so it is important that we get this right from the start.

So let’s look at some of the things that you can do that will help you to develop some good habits that you can start doing straight away.

Start with the basics…

It’s logical to start from the very beginning with the core trading skills and so that is where we will begin. You need these basic skills in order to be a beginner let alone an expert. You need to get yourself a good understanding of different currency correlations, basic economic movements, learn how to identify trends and chart patterns, and to then learn and know the ins and outs of managing risk, which is a big one and something that is paramount to your success as a trader.

It is vital that you do not try to take any shortcuts when doing this first step, you need to be able to perform all of these things easily and quickly. So continue to practice them, you need to be able to do them without really thinking about them, once these have been cemented into your head it will simply come naturally to you when you go to do it for real each time. This is simply building the foundation for the rest of your trading so it is important that you get it right.

Test your skills…

So we have some knowledge and understanding, but we need to be able to test this somehow and the best place to do this is on an account with live conditions. Of course, you do not want to jump straight in with your own money so we need to take a look at a demo account, you should be using one of these to practice for quite a while before you go with your real money, and also back to the demo account any time ta you make changes to your strategy.

For those just starting out, you need to use the demo account in order to help establish some routines, these routines should allow you to identify different trade opportunities, and in order to place trades. You need to test them and practice them in different trading conditions such as quieter times, times of high volatility, trending markets, ranging markets, and more. Ensure that you are logging any results that you get into your trading journal so you can easily look back at them and analyse them to find out what has worked and what has not worked.

Once you have your possessor working out (or more than one) you can then start to think about going into a live trading situation, start by taking very small trades, get comfortable with what you are doing, and the new emotions that come from trading on a live account. You are now risking your own money so it is important that you try to stick to the routines that you created within the demo account, ensure that you are consistent with them and that you are doing it consistently across the different trading conditions that you are experiencing.

Create a feedback system…

The last thing that we are going to talk about is the creation of a feedback system, this is a way that you will be able to see exactly what it is that you are doing and how effective it has been. There Is no point in doing something if you are not able to measure how successful it has been, this will also be a way for you to work out exactly what needs tonnage and the best way of going about that change.

By practicing, analysing and then adjusting and adapting your trading will quickly hasten up the learning process. It will make things a lot easier for you in the short and long run. If you notice something that is consistently holding you back, change it, and test again, keep doing this until you are happy with your progress and your current trading. There Will always be things to improve, you will never be perfect but with each little change, you are gradually making yourself a better trader. You can do this in the form of a trading journal which is something that you’re probably tired of hearing about now. Jot everything down in this little journal and you will instantly get feedback on what it is that you are doing, a vital tool for the future of your trading career.

So those are some of the things that you can do to help you gain some good habits that will ultimately help you to become a better trader. It is a good idea to start doing these as soon as you can, if you are already partway into your career then it is not an issue, you can still work on these things and you can still create those habits that will help you on your journey of becoming a great trader.

Beginners Forex Education Forex Trading Platforms

Reasons to Take Demo Trading Very Seriously

It is incredibly important that you use a demo account, you have probably been told this a number of different times, and it is true, a demo account is vital for becoming successful. Spending a lot of time on a demo account is not something that you should be ashamed of and not something that you should shy away from, it is a fantastic learning resource and a place for you to test out new ideas without any real risk.

One of the main benefits to a demo account is that there is no risk to you, unfortunately, this also means that there is no direct reward, you do not get anything monetarily out of trading on the demo account, so after an extended period of time, it can become boring and so the motivation to continue using it in a way that you would potentially use a live account will begin to dwindle.

This is the time when a lot of people will decide to jump into a live account, simply because they are a little bit boring to use the demo account. Jumping into a live account at this stage, with this mentality will only lead to a blown live account. It is perfectly normal to start to feel bored or to lose that enthusiasm when there is no direct reward from what you are doing, this is where you need to be able to teach yourself and to push yourself to be able to be successful in the demo account and to get the most out of it before moving over to a live account.

So let’s take a look at some things you can do to help you take the demo account a little more seriously.

Creating a Loss or Forfeit

One of the main problems behind a demo account is that when you lose or make a mistake, there is no actual punishment, you will just shrug it off and move on. This is of course completely the opposite of a live account, where a loss, no matter how small can hit you quite hard. It can be hard to take a loss on a demo account seriously due to that very reason. Over a longer period of time, this will ultimately make demo trading a little boring as there is no risk or reward to it, so there needs to be a way to counter this.

One way of countering this lack of loss is to create a real-world penalty that you need to do each time that you make a mistake or that you make a loss. This can be something simple or you can make it a little more realistic. To make things simple, every time you make a mistake or a loss, force yourself to do some pushups or some jumping jacks, this will make you want to work hard to avoid having to do the exercise. If this isn’t for you, you can make it a little more realistic, every time you make an error or a loss, put some money away into a savings account, you aren’t losing the money, but you no longer have direct access to it. You are learning the same ideas of losing access to money with a loss, but luckily aren’t actually losing any real money.

Give Yourself a Mark

One thing that makes trading a little different to a lot of other professions is that when you learn it yourself, there is no grading system, there are no final exams to make sure understand what it is that you have learned or what you are doing, this can make things a lot more accessible, but it also means that there are no knowledge checks along the way, there is no way for you to know how much of what you have learned you have actually taken in and understood. It is important to have an understanding of what you are doing well and not before moving on to a live account, so you do not make the same mistakes on a live account.

Due to this, it is important that you are able to rate yourself, of course, if you just give yourself a rating out of 10 then you will most likely go a bit higher than you probably should, that is the natural thing to do. So, instead, you need to be able to grade yourself on a number of different things, so here are a few things that you could potentially look at after each week or months to gauge how well you are doing.

  • Do you follow your entry rules?
  • Do you follow your exit rules?
  • Do you stick to your risk management plan?
  • How many trades did you take or miss?
  • What is your profitability?

Grading yourself on these basic yet important aspects of your strategy will help keep you on track and will also help to show you exactly where you may be falling short., Work on anything that isn’t getting a 10, of course, you will never get a 10 in everything, so there will always be things for you to work on and improve. Until you are at a high rating for all sections, you should be remaining on a demo account.

Setting Targets

This can go along with the grading system that you created above, except this time we are not looking at just grading, instead we are looking at setting specific targets, and then potentially rewarding ourselves for the work we have done. So let’s imagine that we want to set a target, we want to have a 50% win rate at the end of the month, or we want a 5% balance increase at the end of the month. They are specific goals that we are able to achieve.

One way to make it a little more interesting is to allow yourself to give yourself a little reward should you decide to reach that target. It doesn’t have to be anything huge, it could just be a simple take away or a new pair of trainers. Setting this goal keeps you motivated to work hard on the demo account, but also rewards you for working hard.

Getting Feedback

Getting feedback on your demo account results and progress can give you a lot of validation around what it is that you are actually doing. Posting your results and account statistics on various trading forums will allow others to let you know how you are doing, this is a way of motivating yourself with the positive comments, or where people have offered some constructive criticisms, it is a way to improve the way that you trade.

Feedback can be powerful and it is a fantastic way to keep improving the way that you trade, but also gives you an insight into what others are doing, the demo account is the perfect place for you to try out any of the possible changes that the feedback has offered.

So those are a few different ways that can help you to keep taking a demo account seriously. Demo accounts are so important, they are a risk-free way to improve and learn, but that risk-free aspect also comes with no rewards, so it is important to find ways to help keep yourself motivated at using a demo account to keep it relevant and to help prevent you from jumping over to a live account too quickly.