Demo trading is a good way of starting the trading business. It helps the novice traders develop their skills and learn the trading system they choose. Demo trading is like the flight simulator for pilots. While everything is tried to be the same as the real work, there are some differences naturally.
1. Client/Trader Side Differences:
In demo trading, even if everything is the same as the real work technically, there is one thing that can hardly be the same: You know that you are trading with the demo money, and not your real hard-earned money.
This can make some big differences in the end result. When you know and you always consider that you are demo trading, you will have no or at least less fear and greed. You are not afraid of losing and you are not too greedy to make more. And this will result in having less discipline.
Having no emotion (fear and greed) is really good, but the problem is you will experience these emotions as soon as you start trading with the live account and real money. Therefore, when some traders succeed to make profit on the demo account and then they decide to switch to the live account, they start losing and this makes them surprised. Some of them try to find an excuse for their losses and the broker is the best one to be accused.
There are also some traders who accuse God. They think that God doesn’t want them to make money and they are doomed to be poor. Whereas if they analyze their trades and their behavior and emotions, they will see that they behave completely different in demo and live trading.
The first and most important thing is that you forget and you do not think that you are demo trading and it is just a fake number that goes up and down, and it is not the real money. If you are supposed to open a $1000 live account in future and when it is the time to, then do not open a $50,000 demo account. This makes your mind know that you are not trading seriously and it is just a game. Open a $1000 demo account and treat it exactly as a live account.
The other thing is that some people keep on demo trading for a long time, and will become addicted to it somehow. They spend several hours at the computer, trading the demo account and they make themselves think that they are working and they are doing something useful. Whereas because of trading on the demo account for a long time, while knowing that it is just demo, they completely ruin their discipline.
Demo trading is good, but just for a limited time to learn the trading basics, and know the trading strategy signals and trade setups. Then you must switch to a live account and start experiencing live trading. You can start with small amount of money and small lot sizes, but you have to start it sooner or later. Didn’t you start learning forex to make money? Then you should switch to live trading and see how it feels to earn/lose real money.
You should know that demo trading is not able to develop the discipline you need to trade and make money. If you keep on demo trading for several years, and then you open a small live account, you will definitely feel some different emotions when you want to take a position with your live account. The emotions that you did not have when you were demo trading. These emotions make you make some mistakes that you had become able to avoid in your demo trading journey. You feel more fear when you want to click on the buy/sell buttons, and when the market goes against your position. You also have more greed and you over-trade more.
Then, does it mean that you have to keep on demo trading and stop live trading?
No. You feel relaxed and relived when you go back to demo trading, because those emotions and the losses they caused will disappear again, and you start doing good on your demo account again. This makes you happy and you think that you are doing good, but you are not. The emotions you experience in live trading, do not exist in demo trading (or at least they are weaker and controllable), and so if you keep on demo trading, you will never become able to know and control those emotions. You have to open a live account with the money that you can afford to lose, and then start trading while you are aware of the emotions and your behavior.
Like when you started demo trading and you lost until you learned what to do, you will lose when you start live trading, but finally you will learn what to do. All successful traders have wiped out their accounts at least for a few times at the beginning. This is absolutely normal. Exactly like a kid that wants to learn to walk. He/she falls down numerous times until he/she learns to walk and run.
This is the process in forex trading and in any other business. No Pain, No Gain!
There are so many novice traders who like to make thousands of dollars through forex trading, without spending any money or without handling any loss. Some of them who find Forexoma and hear about the Forexoma trading room which is offered for free to the Forexoma live account holders, just use the chance and open a small $500 to have free access to the trading room and Forexoma robots. While these people are welcome to do this, but sooner or later they have to make themselves dare to click on the buy/sell buttons, and start experiencing live trading. With having a $500 account and not being able to trade even a 0.1 lot position, you are doing nothing but feeding your fear. There is no doubt that this method doesn’t get you anywhere and you will not become a trader finally. You think you are smart, because you have free access to the trading room and you are learning to trade and are not spending nor losing any money, but you do not consider that you are not making any money too and you are just wasting your time. If you really intend to become a trader finally, you should choose the right way.
In forex trading those who try to be too smart, lose more than the others. The biggest loss in forex trading is not losing money in your initial accounts. The biggest loss is choosing the wrong way, wasting a lot of time and then giving up on forex and losing the chance of making any money through forex trading for the rest of your life.
That is why it was finally decided to make some limitations to help this group of novice traders break the ice and start controlling their fear, or at least stop wasting their time. To give the new traders a chance to learn, they can use the trading room for a while without having any trading activity on their live accounts. However, after 2 months of account inactivity, their access to the trading room will be blocked. To have access to the trading room again, they have to have the minimum of 2 months of reasonable and normal trading activity which is an activity that shows that their accounts is opened for trading, not for having free access to the trading room or other things. The minimum of a few positions per week can be known as reasonable and normal trading activity. If the money you have deposited in your live account is all you have and is the money you can not afford to lose, then you should close your live account and forget about forex trading for now. It doesn’t work like that.
To learn forex trading, you do not have to spend any money, because there are a lot of invaluable information over the Internet for free. You just need to find the right way, follow it and finally get where you want to get. However, you will have to handle some losses when you start. And this is something you can not avoid. If you start trading with the money that you can afford to lose, your losses will help you to become a professional trader finally, because they show you your mistakes and help you avoid them.
But with keeping on demo trading for several months and years, you are doing nothing, but developing the emotions that will be your biggest enemy in your trading journey.
What should you do then? What is the solution?
2. Broker Side Differences:
Demo trading is like the computer games. The numbers you see there are just numbers. You can open a $1,000,000,000.00 account and take several 1000 lots positions everyday. There is no limit and problem and the broker will handle all of your orders. Your pending, stop loss and target orders will be executed instantly and not even with a 0.01 pip difference or 0.01 second delay. Why? Because it is just some numbers on the broker’s demo servers. Demo accounts are not connected to any bank and the order you place in your demo accounts do not have to be transferred anywhere. Whereas it is a completely different story with the live accounts.
ECN/STP brokers have to transfer the orders to the banks (liquidity providers), and this makes the demo trading a little different from live trading.
On an ECN/STP platform, when you click on the buy/sell buttons or you place a pending order (including your SL and TP orders) and the market reaches the pending order price:
Although all of the above process is done automatically and electronically, it takes time (even as low as a few milliseconds sometimes) to be done and completed, specially when there are thousands of orders received at the same time. And this required time makes the price differences.
Liquidity providers execute the orders they receive, but not with the price that we say. They execute the orders with the price that they want. You would do the same if you were a liquidity provider. Imagine, you receive a buy order at 1.5625 while there are 15000 other orders ahead waiting to be executed. When it is the time to execute this order, the market price is changed to 1.5700. If you execute the order at 1.5625 then the trader will be 75 pips in profit as soon as the position is taken, and you have to pay this profit as the liquidity provider. This is something that may happen during the news release time. Therefore, liquidity providers place the order on the line and each order will be executed with the price that the market shows at the moment of execution. That makes a lot of sense.
This explains why when you switch from demo trading to live trading with an ECN/STP broker, some of your orders are not executed exactly with the price that they were set to. You set a pending order at 1.2530, but it becomes executed at 1.2531. It is the same with the stop loss and target orders, because they are also orders that have to be executed.
With the market maker brokers it can be even worse, because they have to do something to make sure that all their clients always lose.
Therefore, you should not expect that live trading to be 100% the same as demo trading. It is LIVE and REAL trading after all. It is not a computer game. It is not just playing with some numbers. It is REAL buying and selling on a REAL market.
That is why the scalper robots win on the demo accounts, but lose on the live accounts. It is the same for the scalper traders. Some of them become able to win on the demo accounts, but they can not repeat their success on the live accounts, first because of the new and different emotions that they experience in live trading, and second because of the different conditions that demo and live markets have. You may be able to make 1-3 pips on the demo account, but the live market conditions may not let you do it.
Does it mean that nobody can make money on the live market?
Absolutely not. There are so many trader who make money on the live market consistently. You just need to learn it.
Bottom-line:
You are here most probably because you want to make money through forex trading. This is a good idea, but if you do not know how to trade forex, you also do not know how to learn to trade forex. Most people who start trading forex lose and give up, not because forex trading is hard. But because they not only do not know how to trade, but they do not how to learn. Therefore, they try to plan it on their own. They read so many books, sign up for so many courses, read hundreds of articles, try so many different trading strategies, indicators, robots…, and finally will come to this conclusion that they can not make it work. Sadly, they never think that they are following a wrong way that merely wastes their time and money.
Source: Forexoma.com
1. Client/Trader Side Differences:
In demo trading, even if everything is the same as the real work technically, there is one thing that can hardly be the same: You know that you are trading with the demo money, and not your real hard-earned money.
This can make some big differences in the end result. When you know and you always consider that you are demo trading, you will have no or at least less fear and greed. You are not afraid of losing and you are not too greedy to make more. And this will result in having less discipline.
Having no emotion (fear and greed) is really good, but the problem is you will experience these emotions as soon as you start trading with the live account and real money. Therefore, when some traders succeed to make profit on the demo account and then they decide to switch to the live account, they start losing and this makes them surprised. Some of them try to find an excuse for their losses and the broker is the best one to be accused.
There are also some traders who accuse God. They think that God doesn’t want them to make money and they are doomed to be poor. Whereas if they analyze their trades and their behavior and emotions, they will see that they behave completely different in demo and live trading.
The first and most important thing is that you forget and you do not think that you are demo trading and it is just a fake number that goes up and down, and it is not the real money. If you are supposed to open a $1000 live account in future and when it is the time to, then do not open a $50,000 demo account. This makes your mind know that you are not trading seriously and it is just a game. Open a $1000 demo account and treat it exactly as a live account.
The other thing is that some people keep on demo trading for a long time, and will become addicted to it somehow. They spend several hours at the computer, trading the demo account and they make themselves think that they are working and they are doing something useful. Whereas because of trading on the demo account for a long time, while knowing that it is just demo, they completely ruin their discipline.
Demo trading is good, but just for a limited time to learn the trading basics, and know the trading strategy signals and trade setups. Then you must switch to a live account and start experiencing live trading. You can start with small amount of money and small lot sizes, but you have to start it sooner or later. Didn’t you start learning forex to make money? Then you should switch to live trading and see how it feels to earn/lose real money.
You should know that demo trading is not able to develop the discipline you need to trade and make money. If you keep on demo trading for several years, and then you open a small live account, you will definitely feel some different emotions when you want to take a position with your live account. The emotions that you did not have when you were demo trading. These emotions make you make some mistakes that you had become able to avoid in your demo trading journey. You feel more fear when you want to click on the buy/sell buttons, and when the market goes against your position. You also have more greed and you over-trade more.
Then, does it mean that you have to keep on demo trading and stop live trading?
No. You feel relaxed and relived when you go back to demo trading, because those emotions and the losses they caused will disappear again, and you start doing good on your demo account again. This makes you happy and you think that you are doing good, but you are not. The emotions you experience in live trading, do not exist in demo trading (or at least they are weaker and controllable), and so if you keep on demo trading, you will never become able to know and control those emotions. You have to open a live account with the money that you can afford to lose, and then start trading while you are aware of the emotions and your behavior.
Like when you started demo trading and you lost until you learned what to do, you will lose when you start live trading, but finally you will learn what to do. All successful traders have wiped out their accounts at least for a few times at the beginning. This is absolutely normal. Exactly like a kid that wants to learn to walk. He/she falls down numerous times until he/she learns to walk and run.
This is the process in forex trading and in any other business. No Pain, No Gain!
There are so many novice traders who like to make thousands of dollars through forex trading, without spending any money or without handling any loss. Some of them who find Forexoma and hear about the Forexoma trading room which is offered for free to the Forexoma live account holders, just use the chance and open a small $500 to have free access to the trading room and Forexoma robots. While these people are welcome to do this, but sooner or later they have to make themselves dare to click on the buy/sell buttons, and start experiencing live trading. With having a $500 account and not being able to trade even a 0.1 lot position, you are doing nothing but feeding your fear. There is no doubt that this method doesn’t get you anywhere and you will not become a trader finally. You think you are smart, because you have free access to the trading room and you are learning to trade and are not spending nor losing any money, but you do not consider that you are not making any money too and you are just wasting your time. If you really intend to become a trader finally, you should choose the right way.
In forex trading those who try to be too smart, lose more than the others. The biggest loss in forex trading is not losing money in your initial accounts. The biggest loss is choosing the wrong way, wasting a lot of time and then giving up on forex and losing the chance of making any money through forex trading for the rest of your life.
That is why it was finally decided to make some limitations to help this group of novice traders break the ice and start controlling their fear, or at least stop wasting their time. To give the new traders a chance to learn, they can use the trading room for a while without having any trading activity on their live accounts. However, after 2 months of account inactivity, their access to the trading room will be blocked. To have access to the trading room again, they have to have the minimum of 2 months of reasonable and normal trading activity which is an activity that shows that their accounts is opened for trading, not for having free access to the trading room or other things. The minimum of a few positions per week can be known as reasonable and normal trading activity. If the money you have deposited in your live account is all you have and is the money you can not afford to lose, then you should close your live account and forget about forex trading for now. It doesn’t work like that.
To learn forex trading, you do not have to spend any money, because there are a lot of invaluable information over the Internet for free. You just need to find the right way, follow it and finally get where you want to get. However, you will have to handle some losses when you start. And this is something you can not avoid. If you start trading with the money that you can afford to lose, your losses will help you to become a professional trader finally, because they show you your mistakes and help you avoid them.
But with keeping on demo trading for several months and years, you are doing nothing, but developing the emotions that will be your biggest enemy in your trading journey.
What should you do then? What is the solution?
- Learn the basics of forex market, forex trading and technical analysis.
- Choose at least a good and simple trading system and learn it properly.
- Practice your trading system on a demo account for a few months. Learn to stick to your trading system rules.
- Open a live account with the money that you can afford to lose, and start live trading, not for the purpose of making money, but just to be faced with the emotions that come with live trading, and to learn to know and control these emotions. Money will come only when you pass this stage. So don’t think about making money and becoming rich if you have not passed this stage yet.
- When you became able to control your emotions in live trading and you started making money consistently, then you can top up your account and trade bigger lots. Before reaching this level, you will lose money, and you can even wipe out your account for a few times, but this is the price that you have to pay to become able to control your live trading emotions and become a profitable trader finally. This is one of the most important and necessary stages of becoming a profitable forex trader, whether you like it or not. You have to think about this stage, before you start learning forex. If you can enter this stage, then start learning forex. If you can not, you’d better not to start at all.
2. Broker Side Differences:
Demo trading is like the computer games. The numbers you see there are just numbers. You can open a $1,000,000,000.00 account and take several 1000 lots positions everyday. There is no limit and problem and the broker will handle all of your orders. Your pending, stop loss and target orders will be executed instantly and not even with a 0.01 pip difference or 0.01 second delay. Why? Because it is just some numbers on the broker’s demo servers. Demo accounts are not connected to any bank and the order you place in your demo accounts do not have to be transferred anywhere. Whereas it is a completely different story with the live accounts.
ECN/STP brokers have to transfer the orders to the banks (liquidity providers), and this makes the demo trading a little different from live trading.
On an ECN/STP platform, when you click on the buy/sell buttons or you place a pending order (including your SL and TP orders) and the market reaches the pending order price:
- The broker has to receive your order on its server first.
- Some ECN brokers work with several different liquidity providers. When there is an order, the system looks for a liquidity provider that is offering the best price and liquidity at that moment. Then the order has to be sent to that liquidity provider.
- The order has to be received and approved by the liquidity provider and be placed on the line waiting for execution. Each liquidity provider may receive hundreds or thousands of orders at the same time that your order is also received. All orders have to wait on the line and become executed one by one.
Although all of the above process is done automatically and electronically, it takes time (even as low as a few milliseconds sometimes) to be done and completed, specially when there are thousands of orders received at the same time. And this required time makes the price differences.
Liquidity providers execute the orders they receive, but not with the price that we say. They execute the orders with the price that they want. You would do the same if you were a liquidity provider. Imagine, you receive a buy order at 1.5625 while there are 15000 other orders ahead waiting to be executed. When it is the time to execute this order, the market price is changed to 1.5700. If you execute the order at 1.5625 then the trader will be 75 pips in profit as soon as the position is taken, and you have to pay this profit as the liquidity provider. This is something that may happen during the news release time. Therefore, liquidity providers place the order on the line and each order will be executed with the price that the market shows at the moment of execution. That makes a lot of sense.
This explains why when you switch from demo trading to live trading with an ECN/STP broker, some of your orders are not executed exactly with the price that they were set to. You set a pending order at 1.2530, but it becomes executed at 1.2531. It is the same with the stop loss and target orders, because they are also orders that have to be executed.
With the market maker brokers it can be even worse, because they have to do something to make sure that all their clients always lose.
Therefore, you should not expect that live trading to be 100% the same as demo trading. It is LIVE and REAL trading after all. It is not a computer game. It is not just playing with some numbers. It is REAL buying and selling on a REAL market.
That is why the scalper robots win on the demo accounts, but lose on the live accounts. It is the same for the scalper traders. Some of them become able to win on the demo accounts, but they can not repeat their success on the live accounts, first because of the new and different emotions that they experience in live trading, and second because of the different conditions that demo and live markets have. You may be able to make 1-3 pips on the demo account, but the live market conditions may not let you do it.
Does it mean that nobody can make money on the live market?
Absolutely not. There are so many trader who make money on the live market consistently. You just need to learn it.
Bottom-line:
You are here most probably because you want to make money through forex trading. This is a good idea, but if you do not know how to trade forex, you also do not know how to learn to trade forex. Most people who start trading forex lose and give up, not because forex trading is hard. But because they not only do not know how to trade, but they do not how to learn. Therefore, they try to plan it on their own. They read so many books, sign up for so many courses, read hundreds of articles, try so many different trading strategies, indicators, robots…, and finally will come to this conclusion that they can not make it work. Sadly, they never think that they are following a wrong way that merely wastes their time and money.
Source: Forexoma.com
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