Over the past few years the popularity of the Forex market has grown dramatically. Every day thousands of clients are opening accounts with the hope of earning easy money. Therefore, almost every single forex broker offers a demo account where the client can feel the beauty and excitement of trading in the foreign exchange market.
Very often a novice trader manages to earn huge profits with virtually almost no mistakes. However, why only a very small number of traders manage to transfer this success into a real account? The platform is still the same on both real and demo accounts, the market conditions are also the same. Then why the results are not the same? What changes?
The answer is you. Even though your strategy is the same, there are many factors that start interacting with your decision making process.
What is the most important factor for a successful trade?
When you open your first trade on a real account, and the transaction goes in profit, greed appears. Fascinating aggression grabs you almost immediately, both physically and mentally. However, there is nothing wrong about that as greed most likely led you to try forex. In the end of the day we all want to earn a lot of money.
Fear is also very dangerous. The most insidious fear arises when our ego is affected. How can we admit when we were wrong? It is easier to blame the market and deny our own mistakes.
Demo account is a great opportunity to practice, but remember that the money is not real. It helps us understand how the price moves. Although we may also experience greed, we most certainly will never feel fear while trading on a demo account. If we wipe out our account, we can always register a new one. It turns out that the demo account cannot teach you how to cope with fear, and fear will not allow you to close a trade on time. This is the biggest drawback of demo trading.
It is also important to mention the trade size. Opening a demo account with 50 000 $, and earning $ 1000 in a small price movement seems very easy. Then once you open a real account you wish to earn at least 30-40$ per trade and not few cents. You start to take risks, to increase the size of the position and this leads to failure. But this time you have lost real money!
Be honest with yourself!
Demo accounts are a great start to trade in the Forex market, but they do not guarantee that you will successfully trade on a real account. The most important thing when it comes to trading with real money is the ability to control your emotions. It is not possible to be honest with yourself on a demo account. All in all, a demo account is a great start in the Forex market. However, in order to become a real trader, you will also need to start trading with real money.