People have questions, and they want answers. When they do, where do they go? Well, they us...
![Forex Demo Trading [Everything You Need To Know In 2022!]](https://www.fxsources.com/images/1641965002.png)
People have questions, and they want answers. When they do, where do they go? Well, they usually go to someone who has the answer, and if you’re lucky, that someone might be you.
Anyways, looking to start off trading by using demo trading accounts. Relatively speaking, that's not a bad choice either.
If you're really up for it then be sure to know everything about the demo trading platforms (history, advantages, disadvantages, and all of that).
And... sit tight since I'm about to cover all of those aspects in today's blog. So, let's get going!
Demo Trading Accounts ( A Brief History)
Using a demo account could be viewed as a modern way of trading on old-fashioned paper. His idea was to write down all inputs and outputs in the notebook and then assess whether his method worked.
The term is still valid and sometimes "demo trading" is also called "paper trading" and the money in the account is called "paper money".
This is how the teenager Jesse Livermore began his path to becoming the biggest speculator at the beginning of the 20th century.
In the 21st century, the situation changed somewhat: the idea is the same, but the “imaginary commerce” format is now based on the use of computers.
Due to exchanges, platforms, and brokers, you can open a demo account today with just a few clicks. And that's not its main advantage.
Key Advantages of Demo Trading:
Risk-free. You don't lose real money if you suffer losses by making wrong decisions.
self-analysis. Working on a demo account allows you to identify all your shortcomings in market analysis, business decisions, and strategy. Without stress. greed and fear.
They often do not allow operators to see the key information needed for efficient risk management. Paper trading avoids the emotional rollercoaster ride, which allows a beginner to fully focus on the strategy.
In every element of the trading process, from preparing a trading session to finally recording a profit or loss.
When traders have access to a demo account, they learn to trade real money using the software in a simple mood were pressing the wrong keys would not result in financial disaster.
Work out. A beginner will gain experience in every element of the trading process, from preparing a trading session to finally recording a profit or loss.
When traders have access to a demo account, they learn to trade real money using the software in a simple mood were pressing the wrong keys would not result in financial disaster.
Trust. Making a series of complex decisions that will be rewarded with a hypothetical win is of great importance in building confidence so that a novice can feel like they could do the same when it comes to real money.
Statistics. Business documents from several weeks to a month allow you to collect usage statistical data on a new strategy and approach to the market.
The bare numbers will help you to return to earth or, conversely, to test the applicability of your strategy and suggest optimization possibilities.
Opening a demo account is easy. Now let's look at the disadvantages of paper trading and how it could harm a beginner.
Slippage. As a general rule, orders on a demo account are ideally filled at the price quoted on the last trade. As a result, beginners can have a false sense of confidence in their success.
The point is that in the real market, an order is executed depending on the availability of the counter-order. For example, a shared trend that you buy for $50 in the demo may cost $50.5 or more in the real world.
This is particularly critical with non-liquid instruments. To better understand this paragraph, see the article on matching orders. Commissions.
Commissions. Real account traders have many issues with the broker and the exchange. Not all demo accounts take this expense element into account. which increases significantly in real trading.
Psychology. Demo trading does not cause any real emotion that you experience when you make profits or losses on your real account.
In the real world, many traders reduce their profits and allow losses due to a lack of market discipline.
As a result, a trader who is under pressure could make such decisions that were not allowed to be made on the demo account.
Attitude. Demo traders tend to idealize their results, justify themselves, or make up the reasons why real trading is better than demo trading.
Sometimes, many factors make it difficult to understand if you could do a completely similar trade in the real market. Adjustments can be made for inputs and outputs, which is why the results of the demo account would be somewhat subjective at best and downright wrong at worst.
cheers!
