Part 2 - Are Forex Demo Accounts Realistic?
Demo Account Size
A trader can be quite dreamy and not take the time to look at how much virtual money he has in his demo account. Brokers often offer this type of account for $50,000 to $100,000. Demo traders don't have to worry about losing m or two thousand dollars.
This can indicate a greater issue, such as a lack of self-discipline or disrespect for risk management rules. This is because this breach of the peace can occur later when you start trading on a real account. Typically, your initial capital is $1,000 to $5,000. A series of four to five losses can wipe out at least 20% of your account balance if you don't follow risk management rules.
The frustration from losing will only lead to more mistakes. Also, trading on an important account with too much virtual money can lead to unwise and dangerous behaviour.
Emotions Have an Effect
The performance of a trader is influenced greatly by emotions and other emotional factors. It doesn't matter if traders have technical or fundamental analysis skills, as they will struggle to control emotions such as anger, greed, and fear while trading in the currency market.
Demo traders don't often feel such stress, even when faced with unexpected events like a sudden trend reversal. This is because they trade with virtual money. Demo traders can watch the value movement quietly; sometimes, some of their losing trades may turn into profitable trades without worrying.
These situations seem impossible for a true account trader since he usually uses a stop-loss order to close failed trades. He will be required to execute the order at that overall value if exposed to a large price slip. This is often far from the price specified.
A trader who loses when trading on a real account will cause anxiety when entering or exiting subsequent trades. This will impact the outcome, particularly when compared to the performance on demo accounts free from emotional stress.
A trader who loses trade in the demo will not feel anxious or frustrated when he does so. It's different for the 000 account trader, as losing money will cause his mind and heart to consider entering another trade to compensate for the loss. The trader falls into the trap of over-trading. Sometimes, this leads to more severe losses. In other cases, the trader cannot think about any further moves.
Conclusion
Forex brokers offer demo trading accounts that can be used to practice the strategy and get familiar with the trading platform. Demo traders don't often face the same problems as real traders, such as low liquidity, spread changes, slippage, or high spreads.
Demo accounts can also offer large amounts of virtual money, negatively impacting traders' self-discipline. Demo traders are not exposed to emotional stress associated with market turmoil. A trader or broker can't duplicate the same success or profits he has in the demo account. The demo and training accounts' performance is not realistic.
A demo account is still a good tool for anyone who wants to practice trading, understand the technical aspects of this platform, and get used to price movements. They can also adapt the trading strategy to an extreme degree, giving them the confidence to trade currency markets later.