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Trading on demo

Demo account trading is the imitation of real conditions. Traders record all of the trading decisions and monitor the results without using real money. Most of people trading ‘on paper’ are amateurs who afraid to trade after painful losses in the past. Some of them use both real and demo trading accounts, wondering why they win on the demo and lose in real account deals.

Demo account
Source: Tradingonlineguide.com

There are two reasons for that. First, demo trading has a much less emotional impact. Good decisions come easier when there is no threat to your money. Second, profitable deals often look indefinitely at the opening moment while deals which lead to losses seem to be clear and simple. An unconfident beginner invests in more definite deals while less clear and potentially more profitable deals are usually made ‘on paper’. Twitching between the demo and real account trading does not make sense - you should use one or the other way.

The only benefit to be taken from demo account trading is the self-discipline examination.

If you download exchange quotes on the daily basis, do your homework, keep records of opened positions, monitor opening prices, write down your deals, correcting take-profit and stop-loss orders for several months without wasting a single day, that shows then that you are disciplined enough to start trading on the real account. People, who are seeking fun in the markets, will not be able to cope with such a regime just because this process is quite a time-consuming.

In order to double check your trading system on a demo account, it is necessary to upload the market data daily and analyse it using your technical indicators and other instruments. The deals decisions have to be taken, the levels of stop-loss orders should be recorded as well as the take-profit estimates for the upcoming day. Although you do not open any real positions with the broker, you should check the execution of the orders on the next day like it was the real account. You should keep the records in a spreadsheet or trader’s journal. If you were able to do such a work for several months, then you would be ready to start a real account trading.

Anyway, nothing can replace the real trading because it requires a much more intensive level of the emotional tension rather than any imitation. This is why it’s always better to learn how to trade not on a demo account but in real trading conditions.

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