Getting Ready To Deal In Forex Live

When you are sufficiently comfortable using your demo forex - that is, you have learned the functions of the terminal, you can make trades and not make mistakes such as buying when you wanted to sell, and, most importantly, you have a feeling for the risk involved, it is time to try trading live. Becoming great at demo trading can lead to a false sense of security, because real forex is quite different from it.

The demo is only a simulation, a computer game. Getting a top high score in Formula 1 at your local arcade wouldn’t help you beat Michael Schumacher to the finish line in Monaco. By analogy, most people that spend a lot of time playing with fake money, aiming for high scores, and getting high virtual profits with excessively risky trades, often show less than spectacular results when they attempt to do forex trading online in a real account.

A demo forex account is quite different from a real account in two ways.

The first and most obvious difference is in trader psychology. Human behavior changes dramatically when the person is aware of risks and rewards associated with a certain action. Would you agree to make a two-week business trip to Paris? How about Baghdad? What if you get triple pay while in Baghdad and can stay at an army base? What if you get triple pay, but need to travel the country alone? The answer is different depending on the circumstances, although the action that you need to perform doesn’t change. Fear and greed are basic instincts, and no matter what you tell yourself, you will act differently while trading with your own real money on forex. There is no easy way to circumvent this effect. Basically, you have to learn to be aware of it and make conscious adjustments when under stress .

The other and more obscure distinction between demo and real trade is in order execution.

Demo forex accounts are running in fully automatic mode. A human dealer is most likely involved in execution of your trades in a real account if any significant sum of money is involved, there is turbulence in the market, or your account is flagged for some type of undesirable activity. This means that your trade can take several minutes to execute, while it always takes a second or so in a demo account. To much regret, the faster the market is moving, the longer is the delay. Especially if you use market orders, the price at which you finally get filled can be very bad.

In addition to that, forex simulation on a demo account does not model the filling process. Using a generic price feed, the brokering computer fills you automatically at the last price that was in the feed. In the real forex market, when the price is moving fast, getting filled is in no way guaranteed. You are likely to get a message from the dealer stating that there is no price available, or when you finally get a quote, it may be way off from what you see in the feed.

Altogether, it is too easy to trade in demo forex. Your judgement is not affected by fear and greed, improving your analysis. You don’t second-guess your decisions in the demo, and it’s a lot easier to cut virtual losses than to cut the real ones. Order delays and bad fills don’t happen. Because of this, getting skilled in forex demo trading provides a dubious benefit. Of course failure of a strategy in the demo means that it needs to be improved, so this type of testing helps, but it doesn’t work the other way around. Success of a strategy in the demo does not guarantee anything, especially if it is designed to catch small price movements. This is why the most effective way of learning is to use the demo for getting comfortable with the platform and the market, and move on to the world of real trading as soon as possible.

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