Tag: Live Account

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Forex Basics

Forex Demo Account Vs. Live Account: Similarities and Differences

Forex brokers usually offer two main types of trading accounts: demo and live accounts. Although the accounts are very similar in some respects, there are also a few key differences that traders need to recognize. We will start by outlining what qualifies an account as being live or a demo. 

Forex brokers usually offer two main types of trading accounts: demo and live accounts. Although the accounts are very similar in some respects, there are also a few key differences that traders need to recognize. We will start by outlining what qualifies an account as being live or a demo. 

Forex brokers usually offer two main types of trading accounts: demo and live accounts. Although the accounts are very similar in some respects, there are also a few key differences that traders need to recognize. We will start by outlining what qualifies an account as being live or a demo. 

  • A live account is a real trading account that one opens through a broker. You invest real money into this account. A broker might offer several different types of live accounts, which include but are not limited to Micro, Cent, Standard, Classic, Premium, VIP, etc. Traders then trade in a real environment and either profit with the option to withdraw their funds, or they lose their investment.
  • A demo account can also be opened through a broker and it allows one to trade with fake, virtual currency in a live simulation environment. These accounts are used for practice and one does not invest any real money or make a real profit from them. 

If you’ve never opened a real account before, starting with a demo account can help provide the opportunity to practice in a real environment with zero risks. These accounts are offered by most brokers, but you should know that a few brokers out there don’t offer demo accounts. If your current broker or one you’re considering doesn’t have demo accounts, then a quick Google search will help you find several free options. Opening a demo account should always be 100% free through any broker.

Once you get started, a demo account can serve several helpful purposes. It can help you become more acquainted with a trading platform, practice different strategies, try out different leverages and settings, and see how far you’ve progressed towards being ready to open a live account and make a real investment. However, it is important for traders to know that there are some differences between demo and live accounts so that they do not have a bad experience when they inevitably switch from a practice account to a real account. These are the main differences that every trader should be aware of:

  • Since demo accounts involve virtual money, traders aren’t subjected to the emotions they would feel in a live trading account. Losing $100 on a demo account will not make you sick but losing it on a real account might be a different story. Anxiety, greed, excitement, and other emotions will be present once you switch over to a live account. Remember that making decisions based on emotion should be avoided, otherwise your trades will suffer. 
  • Demo accounts do not see slippage, requotes, delays, or other unexpected situations that might affect a real account. Slippage is a common example where there is a delay between the quoted price and the execution of the order. These types of events are more likely to occur when market volatility is high, but they won’t affect you on a demo account, so you need to be aware of them once you move on to a live account.
  • Execution speed is important when you’re trading on a live account. If you have a problem with your internet connection or a power outage, you could lose real money. Everything happens faster on a demo account, while the speed of your connection will directly affect your orders on a live account.

Demo accounts offer a lot of perks. They can help one to become more acquainted with trading and offer an opportunity for practicing basic skills and more advanced concepts without the fear of losing real money. While demo accounts are mostly useful, traders do need to remember that there can be problems with delayed order execution in times or high volatility or because of events like power outages or slow internet connection speeds. Another major fault with demo accounts is the fact that they cannot prepare one for the rollercoaster of emotions that come with trading on a live account.

Since demo accounts are free practice tools, there is no reason not to test one out before moving on to a live account. However, traders need to remember the ways in which demo accounts differ from live accounts so that they are better prepared to deal with those issues without losing money because of altered expectations. 

 

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Forex Basics

Exploring the Psychological Differences Between Demo and Live Accounts

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, […]

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, […]

Opening a demo account is an important first step to becoming a trader, as it allows one to practice trading in a simulated environment without risking real money. While trading on a demo, traders can become more acquainted with a trading platform, practice different strategies, gauge their preparedness to move on to a live account, and so on, which is why demo accounts are often recommended as one of the best free hands-on tools for beginning forex traders.

While these accounts offer many benefits, there are some psychological differences between the simulated and real accounts that beginners might not realize. Understanding these differences is important so that it doesn’t catch you off guard and cause you to lose money when you decide to move on to a real account. 

Difference #1: Emotion

When you’re trading on a demo account, you use virtual money, meaning there are no consequences. If you take your demo results very seriously, you might care a little when you lose, but this still doesn’t compare to the way you’ll feel when real money is on the line. Once you could really lose your hard-earned money, you might become anxious, paranoid, or fearful. When you’re winning, emotions like overconfidence can lead to problems like overtrading. The best way to prepare yourself for this is to start by reading up on trading psychology so that you will more easily recognize it if your emotions begin to interfere with your trading decisions. 

Difference #2: It’s More Difficult to Stick with Your Plan on a Real Account

On your demo account, it will be easy to stick with your plan because you know that real money isn’t on the line and you need to know if the plan actually works. Once you move over to a live account, you’ll be more tempted to deviate from your plan and commit trading “sins”, like moving your stop loss, cutting off winning trades early due to anxiety, or revenge trading. 

Difference #3: The Reset Button

If you don’t like the results you’re getting on your demo, it’s easy to simply create a new one and start fresh. If you run out of funds, support might also be willing to top up your account with more funds. Knowing that you have the ability to start over without consequences can provide a sense of comfort because there isn’t aren’t any real repercussions. Things are much more different on a live account, however, where a blown account balance might be enough to make one want to end their career. Otherwise, you’ll have to pull more money out of your pocket to keep going. There is no reset button when it’s real and that can take away from one’s sense of safety. 

 

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Forex Basics

Signs that You’re Ready to Open a Live Account

Have you been considering the benefits of becoming a forex trader lately? Perhaps you’ve heard stories from close friends or family members about the success that it has brought them, or you might have stumbled upon trading articles online that inspire you to try it. Daydreaming about becoming a successful forex trader is one thing, […]

Have you been considering the benefits of becoming a forex trader lately? Perhaps you’ve heard stories from close friends or family members about the success that it has brought them, or you might have stumbled upon trading articles online that inspire you to try it. Daydreaming about becoming a successful forex trader is one thing, […]

Have you been considering the benefits of becoming a forex trader lately? Perhaps you’ve heard stories from close friends or family members about the success that it has brought them, or you might have stumbled upon trading articles online that inspire you to try it. Daydreaming about becoming a successful forex trader is one thing, but many of us find that actually opening a live account is another. After all, you might be wondering if you’re truly ready or you could be having a tough time committing to making that initial investment. Don’t worry though – we’re here to tell you if you’re ready, or if you need to spend more time preparing so that you’re more likely to be successful.

Sign #1: Your Demo Results Say Yes

If you’re truly considering switching to a live account, we hope you’ve been practicing on your demo account first. If you don’t even know what that is, you should know that demo accounts are hands-on tools that are offered for free by most forex brokers. These accounts allow you to trade in a live environment while using fake currency so you’re not at any financial risk. Beginners can really learn the ropes by using these accounts because they will allow you to become acquainted with the mechanical aspects of trading, like working a platform or entering trades, exiting, and so on, you can test different strategies with them, and can still benefit from using them later on. If you haven’t signed up for a demo account yet, this is where you should start.

On the other hand, if you’ve already opened your demo account and you’ve been trading on it for a while, your next step is to analyze your performance. A good indicator that you’re ready to move on would be consistent profits with noticeable improvement since you first started. This doesn’t mean you have to win every single trade you’ve entered, but you should be able to tell that you’re improving as a trader and that you would be making profits on a live account rather than losing money. If you’re not quite there yet, don’t jump the gun and open a live account yet. Instead, spend some more time practicing.

Sign #2: You Have a Risk-Management Plan

It’s been said that 50% of your trading success depends on your risk-management plan. To be clear, this defines the way that you plan on reducing the overall amount of money you risk when trading. You’ll want to consider how much you’re willing to risk on each trade for starters, as some beginners make the mistake of risking way too much at first, which leads to a blown account. Some experts recommend limiting your risk to 1-2% of your account balance per trade, while others suggest that it’s better to analyze each individual trade to decide how much to risk based on the chances of that trade being successful.

You’ll also want to employ stop losses to ensure that you don’t lose too much on your trades if the market moves against you. If you’re already considered different risk-management strategies and you have the answers to these questions, then you might be ready to move on. Otherwise, you should spend more time developing your risk-management plan to ensure that you don’t lose a lot of money in the beginning. 

Sign #3: You Can Handle Losses

This one might be a little harder to answer considering that your only experience so far likely comes from a demo account. This is because those that are trading on a demo don’t have any real money at risk, so they are less likely to succumb to the emotional aspect of trading. Still, traders should take their demo results seriously, so you’re still likely to feel a little sting when you lose. Try to think of the way you feel when you do lose on the demo account and how you might feel if you had actually lost that money in real life. If you think you could handle it calmly, you’re probably ready to move on. 

Sign #4: You’ve Invested Time into Choosing the Right Broker

What broker do you plan on using? Some might already have a broker in mind or plan to open a live account through the broker they’ve been using for demo trading. If you do plan to use the broker you’ve been demo trading through, you will already have an idea of what their conditions are like, but there is more left to consider. For example, do you know anything about the funding options offered or how much will be taken in fees when you withdraw money? Some brokers will allow you to withdraw for free, while others charge fees upwards of 7%.

Think about the difference that will make in your profits. What about hidden charges, such as inactivity or maintenance fees? Before making a final decision, you need to go over everything on the broker’s website, including their terms and conditions, or else you could find some nasty surprises later on. Truly researching any broker you plan on choosing is the last sign that you’re ready to put in the effort and make the observations required of you as a true forex trader. 

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Forex Basics

Making the Switch from a Demo Account to Live Account

One of the most important things to keep in mind is that trading a real account is very different from a demo account, at least from a psychological point of view. Changing a demo account to a real account is a relatively simple process. Depending on your broker, it can be as easy as clicking on a web page several times to fund an account and then start trading live.

One of the most important things to keep in mind is that trading a real account is very different from a demo account, at least from a psychological point of view. Changing a demo account to a real account is a relatively simple process. Depending on your broker, it can be as easy as clicking on a web page several times to fund an account and then start trading live.

One of the most important things to keep in mind is that trading a real account is very different from a demo account, at least from a psychological point of view. Changing a demo account to a real account is a relatively simple process. Depending on your broker, it can be as easy as clicking on a web page several times to fund an account and then start trading live.

As a last resort, most of the brokers are trying to reach do live trading, and the demo account is the first part of the process to accept a new customer. After all, you are now starting to lose money and that is much more painful than being wrong in a trade. If you’re wrong on a demo account, your pride is at stake. If you’re wrong on a real account, your pride and your money are on the line.

Documentation

When you are ready to open a real account, you will need to facilitate a certain amount of documentation. In general, you are usually offered a real account only after you can prove your identity, residence, and any other legal document required for the regulatory entity with which the broker must deal. In general, you’re seeing some kind of government identification and some kind of utility bill from the address you live at. Beyond that, there will be some legal documents to sign that will be provided by the firm’s attorneys.

There will probably be some code of conduct agreement as well as even more if there is a social trading platform. Obviously, this will differ from Broker to Broker, but in general, these are the “rings” that will go through.

Funds

Financing will vary from Broker to Broker, but most of them will accept bank transfers, checks, and various types of electronic payments such as Paypal, Skrill, and many others. It is the part of financing that proof of identity is so important for brokers, as there are strict international laws against money laundering that brokerage accounts used to be used against. Financing can take only a few minutes, or a couple of days, depending on the broker’s administrative speed and the completed form.

The Psychology

The psychology of going live is a bit of a mix. Initially, it is an exciting time to be a trader because it suddenly becomes “real”. But fear also becomes a serious problem. Suddenly, losing does matter and you’ll realize that you feel much less comfortable when you operate on paper. The psychological part of trading is certainly the most difficult, but it is also the most important. It is your psychology that will help you through difficult times and keep you grounded during high times. I cannot stress this enough: its success lies within the realm of psychology and, of course, also of money management.

Administration of Funds

As mentioned above, money management is a big part of its success or failure. It really is true that random trading can generate profits if you use proper money management and psychology does not play against you. This is why many traders may have the same strategy as other traders and get completely different results. It’s about being able to keep your losses small and let your winners run. I know it’s a cliché, but it’s true, and that’s why you hear so much about it.

First, prove to yourself that you can win. One of the biggest mistakes I see that traders make is that they don’t succeed at demo trading initially before risking money. For that, it is supposed to be there a demo account, although I must admit that the vast majority of brokers use it as a commercial hook to increase their sales. Too many people are too excited about real-money trading to learn how to make long-term profits. Most brokers know this, so they have no problem giving away these free demo accounts because they know that it is very likely to go on the market long before it is profitable.

However, I ask you: “How can you expect to make money in the real world if you cannot do it in a simulated environment?” It’s a lot like allowing a doctor to practice in the real world who failed in medical school.

Too many people think they are going to enter the markets and carry out a massacre immediately, without understanding how difficult it is going to be profitable and successful in this effort. Actually, it can be a very rewarding race in which to participate, but you must take your time and be patient about the way the market moves.

Conclusion

Switching from demo to live account is relatively simple most of the time, but you need to have proper documentation. The real challenge comes down to doing it. If it is not profitable in a demo account, there is no way to do it in a real account. In fact, I can guarantee that you will end up losing your money. The average retail account is sold out in 90 days. Keep this in mind, but what I would say is that everything is avoidable, however, if you just take the time to learn how to trade, and only then do you start putting your money to work.