This is a brief look at the graduation process from demo trading to live trading.Demo trading is an important step in the forex trading learning curve. Sadly, demo trading is not given the kind of attention it deserves by so many traders. Demo trading is a bit like the flight simulator in aviation. It is a test of the real thing. Therefore, traders should take every aspect of demo trading seriously, like life itself depended on it.
How do you start?
The first thing is to create a demo account. You download the forex trading platform and create the demo account using the broker’s instructions. In creating the demo account, do not get tempted to start trading with the $100,000 virtual money that traditional brokers offer by default, because 95% of retail traders do not have $100,000 to trade with.
It is a fact. As a demo trader, your job is to simulate the real thing, so create an account with the same starting balance that you would start with when you begin live trading.You should also set the same leverage as you would use in a live account, with the same trading tools, indicators, etc. Simulating trading with $100,000 when you know you will probably start with $1000 or less in a live account is pure delusion.
Trade as you would trade in a live account. Do not open trades for the heck of it. Trade the news the same way you would trade a live news event on a live account. You need to experience issues like slippage, re-quotes and other issues retail traders contend with.
You need to get stopped out once in a while. Indeed, the more times your trades are stopped out on demo, the better, because like Thomas Edison said of his failed 10,000 experiments trying to create the incandescent bulb, every failure or every stop loss event you suffer teaches you one more way not to get stopped out. Learn to navigate the platform.
Explore the trading tools such as the indicators for technical analysis. Practice all what you will read up and what you may be taught in seminars on your demo platform.There is no set time to decide on when to go live, because the learning experience in forex trading never truly ends. Going live changes the game completely. Losses in demo do not evoke the same emotions as when you lose real money, because this time, the losses are for real.
They will touch the very fabric of your emotions, and gaining emotional control is a very key aspect of trading. Emotional control is never achieved via demo trading. In order to gain some experience on how to control your emotions during trading, you need to trade live, but you should start small.
Ideally, your first live account should not contain more than $500. Practice emotional control with your first $500. Feel what it is to win and lose trades. By the time you have gained some measure of experience in this regard, as well as a few other things that you can only learn by live trading, you can then confidently step up your trading capital knowing that you can handle it.
In forex trading, retail traders have a lot to learn from the institutional traders such as the big banks. How many investment banks take a rookie from their training schools and plunge them into controlling billions of dollars’ worth of positions?
The few cases where rogue traders in investment banks did unauthorized trades beyond their assigned portfolios, it was disaster personified. Simply ask Société Générale and more recently, UBS and they will explain better.
Demo trading can make you a better trader, if you transition from demo to live trading the right way.
Article source: etoro.com
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