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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.


Anhänge:


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.
mlawson71
Sep 23 2016 at 10:24
1487 Posts
I don't know, I am almost getting to that point but I am not totally calmer. Although I am significantly calmer than before. I chalk this up more to emotional exhaustion than to actually learning how to be calm though. :D

kieran (snapdragon1970)
Sep 23 2016 at 10:49
1945 Posts
Everyone goes through this journey,when you get emotionally involved it's time to step back,you will make bad decisions,only trade when you are sure of a possible trade ,looking at strong support and resistance in the longer time frames as you are doing,cut down screen time,I set price alerts or I could be sitting on the patio drinking coffee waiting for it to hit a certain level,no trading until then.Most days forex has to trade up and down unless of news out then the trend bias kicks off till exhausting point ,the cycle repeats.

"They mistook leverage with genius".
Alan (alan_jp)
Sep 25 2016 at 08:53
1 Posts
snapdragon1970 posted:
Everyone goes through this journey,when you get emotionally involved it's time to step back,you will make bad decisions,only trade when you are sure of a possible trade ,looking at strong support and resistance in the longer time frames as you are doing,cut down screen time,I set price alerts or I could be sitting on the patio drinking coffee waiting for it to hit a certain level,no trading until then.Most days forex has to trade up and down unless of news out then the trend bias kicks off till exhausting point ,the cycle repeats.


Kieran makes some good points although saying 'cut down screen time' is like telling an airline pilot to 'cut down on flight time'; the more screen time you accumulate, the more 'intuition' you will develop. You can cut down screen time after you've become consistently profitable, however, the above still applies.

To speak on topic: The only difference I see between a demo and real account is that with a demo account you may take certain risks that you would not take with real money. If these risks pay off (by chance) you may be led to a false sense of success. As long as you treat the demo account money exactly as you would treat your own real money, there should be no significant difference.

Low drawdown - consistent returns
Jaco Ferreira (JacoAF)
Sep 25 2016 at 09:06
130 Posts
I think Kieran has the right idea here, and to emphasize his point, I would add that it is crucial you ONLY look for for high probability setups near strong support and resistance levels. Many new traders make the mistake of trading every Hammer, MA Cross or 50% Fib retracement, simply because the indicator told me to buy/sell. The key to using any tool on your charts, whether its an MA Cross, Candle Pattern, Chart Pattern, Harmonic Pattern, RSI, MACD, etc. is to have the patience to wait for these signals to happen near strong support and resistance levels. This way you will get a much higher probability of your trades working out.

Keep it simple, be disciplined, get rich slowly and above all protect your equity!
kieran (snapdragon1970)
Sep 25 2016 at 22:59
1945 Posts
alan_jp posted:
snapdragon1970 posted:
Everyone goes through this journey,when you get emotionally involved it's time to step back,you will make bad decisions,only trade when you are sure of a possible trade ,looking at strong support and resistance in the longer time frames as you are doing,cut down screen time,I set price alerts or I could be sitting on the patio drinking coffee waiting for it to hit a certain level,no trading until then.Most days forex has to trade up and down unless of news out then the trend bias kicks off till exhausting point ,the cycle repeats.


Kieran makes some good points although saying 'cut down screen time' is like telling an airline pilot to 'cut down on flight time'; the more screen time you accumulate, the more 'intuition' you will develop. You can cut down screen time after you've become consistently profitable, however, the above still applies.

To speak on topic: The only difference I see between a demo and real account is that with a demo account you may take certain risks that you would not take with real money. If these risks pay off (by chance) you may be led to a false sense of success. As long as you treat the demo account money exactly as you would treat your own real money, there should be no significant difference.

Its all good,switch over to autopilot when you can,the tools are there so make use of them,trading is part intuition part random walk,be aware of both.One other thing be aware of consolidation periods because a breakout will soon occur,usually a fake breakout followed by dumping in the opposite direction.Not always but sometimes,One thing I was taught was if a similar pattern is happening say around 3.45-4pm you want to be keeping a close eye,are the odds of it happening again in my favour or not ,is it a trade worth doing.At the moment I'm trading eur/gbp because there is so much hype about it,selling it short on extreme highs and buying it at lows.The consensus is negative skewed for GBP so leaning more to buying EUR obviously.

"They mistook leverage with genius".
olivia_jones
Sep 27 2016 at 13:50
24 Posts
Hello,

Well I feel that the difference is just in our heads. As a newbie trader, I have always liked the concept of demo trading before going live. Most of the brokers offer same quotes, spreads and trading conditions on both demo and live accounts. At least demo trading allows you to sharpen your trading skills, test your strategies and learns from the virtual losses. Go live once you have started earning profits consecutively in demo trading. As a new trader, all you are looking to do is learn to trade profitably and the bigger prize will follow.

xgavinc
Sep 28 2016 at 09:51
235 Posts
olivia_jones posted:
Hello,

Well I feel that the difference is just in our heads. As a newbie trader, I have always liked the concept of demo trading before going live. Most of the brokers offer same quotes, spreads and trading conditions on both demo and live accounts. At least demo trading allows you to sharpen your trading skills, test your strategies and learns from the virtual losses. Go live once you have started earning profits consecutively in demo trading. As a new trader, all you are looking to do is learn to trade profitably and the bigger prize will follow.


Sort of... I'm sure you will agree that a $100 000 standard demo account is pointless (unless you plan on opening a $100k live account).

I prefer to 'practice' new methods / ideas / strategies on eg. a $30, low leverage (less or equal to 1:100) real micro, market execution account as opposed to a demo. The lessons learned are more accurate (more effort to learn about mistakes when using real money than just saying, 'eh, ok, open new demo') and losing $30 won't break the bank.

Not many brokers provide flexible options on demo accounts (maybe just an option for micro and standard, the rest, like start amount, execution type, etc. are written in stone).

$100k demo to test EA functionality (Is it opening trades, closing trades, using indicators or price action correctly, etc.)... fine!, 100%, no problem... else... no.

For every loss there should be at least an equal and opposite profit.
kieran (snapdragon1970)
Sep 28 2016 at 12:10
1945 Posts
I always noticed trading on demo there were no problems,soon as I started making money in live account that's when the problems occurred,broker servers slowing down when I would want to close a winning position,re quotes,logging out,trying to scalp in those conditions was impossible,so I switched brokers a few times and trade longer time frames,much easier.Practice all you want on demo, if you think live is the same your only fooling yourself.

"They mistook leverage with genius".
Jaco Ferreira (JacoAF)
Sep 28 2016 at 12:43
130 Posts
snapdragon1970 posted:
I always noticed trading on demo there were no problems,soon as I started making money in live account that's when the problems occurred,broker servers slowing down when I would want to close a winning position,re quotes,logging out,trying to scalp in those conditions was impossible,so I switched brokers a few times and trade longer time frames,much easier.Practice all you want on demo, if you think live is the same your only fooling yourself.



Have you tried a VPS Kieran... I have had connection problems like the terminal disconnecting from the server, lag on order execution etc. I got a VPS and things run much smoother now. Still get re-quotes sometimes in high volitity, but it works much better..... talking about algo trading of course.... not manual trading

Keep it simple, be disciplined, get rich slowly and above all protect your equity!
Rafael (Pumentio)
Oct 05 2016 at 07:00
12 Posts
In most cases, demo is different from live with even same strategies.

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