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DEMO ACCOUNT vs LIVE ACCOUNT

mlawson71
Sep 12 2016 at 09:32
1487 posts
I would recommend doing so only if you see that you can profit consistently over a considerable period of time. And even then open a small account until you get used to trading with real money.

xgavinc
Sep 12 2016 at 09:51
235 posts
mlawson71 posted:
I would recommend doing so only if you see that you can profit consistently over a considerable period of time. And even then open a small account until you get used to trading with real money.


I second that comment. Start small, real micro / mini account. Don't deposit all your funds, keep to leverage 1:100 or lower (higher leverage is tempting, but cuts deeper on losses).

For every loss there should be at least an equal and opposite profit.
Jaco Ferreira (JacoAF)
Sep 12 2016 at 11:29
130 posts
TheOne1 posted:
I'm new to trading and I've been trying to trade on a demo account. I 'Earned' about a 1000 usd, this boosted my self-confidence and I'm thinking about trading for real.


I can give you some advise from my own experience. When I started I once to turned a $1000 demo account into something like $16000 (more or less) in two weeks trading the USDJPY. Needless to say I saw myself as a 'trading king', and promptly opened a $1000 live account.

Boy did I get my behind handed to me. I literally lost the whole account in 4 days. The biggest problem with trading a demo account is that you don't experience the emotional turmoil of trading live. Think about it for a minute. If you are trading a demo and your account goes into a considerable draw-down (by that I mean your trades goes negative), you don't really mind sitting through the draw-down to wait for the market to turn in your favor. Now imagine doing that with your own money. How long will you be able to stomach the though of taking a big loss.

This is just one example of how emotions influence a trader on a real account. Other considerations is that you will experience re-quotes, laggy servers in times of high volatility, markets gapping right through your stop-loss or take-profit levels, etc.

mlawson71 and xgavinc is a 100% correct when they say you should wait until you are consistent over a longer period. I would suggest the following:

1) Write down a simple to follow trading strategy. Keep it simple, but have clear rules for when to enter and exit trades. For example, if RSI is above 55 and Fast EMA(14) is above Slow EMA(55), buy, and when RSI is below 45 and Fast EMA(14) is below Slow EMA(55), sell. Exit trades if either RSI is above 80 or below 20, or the take-profit level is reached. I just made this up, but you get the idea for as simple strategy.


2) Write down a simple Trading Plan that should address the following:

a) What is your Risk Reward ratio - Risk is the distance in pips from entry to stop-loss and Reward is the distance between entry and take profit. The RR Ratio should be at least 1:2, but generally speaking its wise to go for trade setups with a RR of 1:3 to 1:5. This way you can take small losses (3 to 5 in a row) and still recover with the next profit.

b) How will you manage Risk. Risk is all about losses. How much are you willing to lose on a single trade, as well as all open trades. I use a simple percentage of 1% of my account balance per single trade and 5% of all open trades.

c) How will you manage your Money. This sound strange, but what it boils down to is this. When in a winning trade, don't let it turn into a loser. Use Trailing Stops, close part of the trade, etc. Also if it looks like the market is going string in your favor, move your Take-Profit level a bit.

d) How will you manage your emotions and trading discipline. Write down personal rules like 'after three losing trades in a row, I take a break for a few hours. I attached a PDF with rules I teach my students. You are more than welcome to use it if you want.


The point of a demo account, in my opinion is to prepare your trading strategies and trading plan, practice it until you get consistent results over a long period of time. It's like going to the military, you get drilled and trained hard to instill discipline and until you can do without having to think too much.


Anyway, good luck learning, and don't be too hasty opening a real account. And like the other gentleman said, open a small account until you are used to real live trading.


Attachments:


Keep it simple, be disciplined, get rich slowly and above all protect your equity!
kieran (snapdragon1970)
Sep 12 2016 at 15:29
1945 posts
Good advice above,one thing you could do is stick to one product for awhile ,say Eur/Usd see what it does on a daily basis,learn its habits around events/news etc.Best times to trade it that you will have a higher rate of success,real account is the only way to learn because of the emotions involved,start a small account that you can afford to lose.
Like the military they train you in a stressful situation,there is no stress in demo,therefore your ill prepared for the events that unfold.

"They mistook leverage with genius".
mlawson71
Sep 13 2016 at 10:04
1487 posts
That is really good, detailed advice. I wish I had someone give me the same advice when I started trading.

Janeo
Sep 14 2016 at 12:36
18 posts
Well, often it is said there is no difference between live and demo account but in practice, results achieved from demo trading account may differ from actual live trading results in some cases which are
1. The broker may execute demo stop loss orders accurately in demo account but slippage may occur in live trading account.
2. A lack of emotional commitment from trader side when no real money is at stake may create a positive trading environment but that is not in case of live account.
The aftermath of demo and live trading comes out to be at odds for the traders.

mlawson71
Sep 15 2016 at 09:51
1487 posts
Slippage is incredibly frustrating and annoying when it occurs, and it occurs quite often, unfortunately.

xgavinc
Sep 15 2016 at 10:11
235 posts
mlawson71 posted:
Slippage is incredibly frustrating and annoying when it occurs, and it occurs quite often, unfortunately.


Only if you are scalping or day trading, not really an issue for swing or momentum trading (unless you are aiming for a specific mark, which over days / weeks / months I would find is a bit absurd) and if you are a positional trader and slippage bothers you, you have major OCD :-D

For every loss there should be at least an equal and opposite profit.
Ahmed73
Sep 22 2016 at 11:43
3 posts
Hi, all!
It is quiet difference in your behavior. In Demo you are totally calm. You do not have a risk to lose all your money, but in Real you are nervous trying to open and close lots every minute. You cannot sit opposite monitor and watching how you money are going to escape. For me it is impossible to open long positions in Real.

xgavinc
Sep 22 2016 at 11:48
235 posts
Ahmed73 posted:
Hi, all!
It is quiet difference in your behavior. In Demo you are totally calm. You do not have a risk to lose all your money, but in Real you are nervous trying to open and close lots every minute. You cannot sit opposite monitor and watching how you money are going to escape. For me it is impossible to open long positions in Real.


By the time you get to 5 (maybe even 4) years trading real... you too will be totally calm.

Edit: And you won't sit staring at the screen watching every tick either.

For every loss there should be at least an equal and opposite profit.
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