AB20 - Importance of trading with a demo account

"A demo trading account is an important toolkit in the journey of a trader. While traders usually start their journey into forex trading using a demo trading account, this is often discarded as a trader becomes more confident. Therefore, many think that a demo trading account is just a crutch to get rid of after one learns how to run. In reality, a forex demo trading account are like a simulation tool. The more you use it, the better the chances of increasing your success as a trader. There are many benefits of maintaining a forex demo trading account, regardless of whether you are a novice or an experienced forex trading. In this article, we give you a pointers on the importance of using a forex demo trading account and the benefits that you can gain from this. You will learn why some of the most experienced traders at prop firms continue to use a demo trading account. The importance of a forex demo trading account is not just limited to the profits and losses but also play a big role psychologically."

Having a forex demo trading account is one of the keys to the success of your journey as a trader. Many traders often frown upon using a demo trading account, especially after they have been trading with a real trading account for a while.

Many often think that a demo trading account is useful only during your time a beginner to forex trading. But this is not the case. A forex demo trading account is important at all points of time if you are trading forex regularly.

Let’s look at some of the advantages that a demo forex trading account can bring to the table for you as a trader.

1. A demo trading account helps you to constantly evolve as a trader

For many traders, once they find a trading strategy, the need for a forex demo trading account is no longer required. The justification for this is that with a good trading system already in place, there is no need to further test the system.

But as you may know, the market conditions continue to vary from time to time. There is a good chance that your trading system, which previously worked under certain market conditions may no longer be effective.

A demo trading account helps you to constantly keep yourself up to date with the markets. This allows you to test your trading strategies based on the current market conditions. It is a lot cheaper to lose money in a forex demo trading account rather than lose money in a real trading account.

2. Back testing your strategies

A forex demo trading account gives you the chance to back test your strategies or various other indicators that you might want to use. This back test of strategies means that you can test new strategies or apply new indicators in the safety of a demo environment.

There are chances that something could go wrong in the markets which could render your current trading strategy useless. Under these conditions, a demo trading account allows you to use the demo account as a sandbox to back test and improve the trading strategies or indicators that you might want to use.

3. A fallback when you hit a string of losses

Emotions, as you know by now can play a big role in the markets. When you are hit by a string of losses in the markets, falling back upon the safety of a demo trading account can help you to recover.

Many prop traders maintain a demo trading account where they use this as a way to rebuild confidence. Taking a string of losses can hit your confidence in a bad way. This could lead to making undue errors even more.

To regain the confidence, good traders go back to trading on a demo account until their confidence is back up again. This allows them not to risk their real money but at the same times keeps them to practice the markets.

4. Testing new indicators and trading systems

When you find a trading strategy or an indicator that seems promising, the general urge is to test it in the real markets. This happens because psychologically you do not want to miss any trading opportunity.

A forex demo trading account allows you to test new indicators and trading systems before you apply it to the real market conditions. This will give you the familiarity of getting to know the trading system or the new indicator in a bit more detail. At the same time, you can learn about the potential loopholes or weaknesses in the systems before you apply it to the real markets.

With the MT4 platform now directly integrated with the MQL5 website, you can automatically download the indicators to your demo trading account and start using it there first before you commit to purchasing it for your real trading account.

5. Practice, practice, practice

Practice makes you perfect and there is no denying that with a forex demo trading account. There are times when you might have a trade running for a few days at a stretch. Sometimes, the need to take on undue risk can outweigh logic. Overtrading, as you might know is one of the main reasons why traders end up giving back the profits the markets give them.

A good way to overcome this is to use a demo trading account. Not only does it allow you to practice but it also keeps you from overtrading in the markets. This can be a safe way to build your skills while not having to risk more than what you should with real money.

Read 614 times Last modified on Wednesday, 19 June 2019 11:27

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