How Demo Accounts Are Different to Live Accounts

Regardless of how prepared you think you are, you should never jump straight into the Forex market, if you have had no previous trading experience.

Demo accounts are provided by most Forex brokers. Some brokers will provide these types of accounts for a limited time only, whereas other brokers will allow you run a demo account for as long as you like. They are practice accounts which allow you to enter the currency market and start trading, without risking any of your own money. A Forex demo account tends to be setup in an identical way to a live account, with the only difference being that the money is not real in these types of accounts. Except for the money, everything else is real in a demo account, including the charts and orders placed which are both connected to the FX market in real-time. So, by placing a demo order using a demo account, you will be able to fully simulate the technical aspects of trading in the Forex market.

Now although Forex demo accounts are highly recommended for beginners and for anyone who wishes to experiment with a particular broker’s trading platform, regardless of how well disciplined you are, you will not feel the same emotional attachment to your demo account’s money as you would to your own money. This is because the money in an account on this type is not real and cannot be withdrawn. However, your own money is real and you would have had to have earned it.

Because you will feel no emotional attachment to the play money in your demo trading account, you might feel more impulsive or at least more willing to take riskier moves. You might then move onto using a live account but then fail, because the trading experience that is produced by using a live account, is much more different to the trading experience produced by using a demo account.

In order to get around this indifference between demo and live trading accounts, you might want to consider starting your live account off with a smaller balance, placing a few smaller orders with your own money. You might want to use a broker that can offer variable lot sizes for this, or you could even consider signing up for a micro account which will allow you trade micro lots, as many online Forex brokers will offer these nowadays. Then, once you start to experience some kind of success, you could then consider depositing more of your own money.

In conclusion, Forex demo accounts are essential for beginners. Practice accounts are great tools for learning how to trade in the currency market. However if you are a beginner, although it is necessary to master the technical aspects of your chosen broker’s trading platform, you also need to remember that mastering your emotions is also necessary in order to ensure your long-term success. Trading psychology is very important and the FX market, much like the other financial markets, is based on the psychology of the traders and investors inside it.

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