Practicing on a demo account before moving on to the real money trading is an obvious requirement for successful participation in the Forex market. It is always better to lose virtual money while you are learning new market theories, developing your trading system, or improving your practical Forex skills. But is it right to jump from the virtual account to a big real money one when you suddenly realize that you manage to be profitable for a long period of time in your demo trading? Here are some reasons to move on to just a small real account before risking a lot of hard-earned money on Forex:
- Real trading is different from virtual because you get real emotions when you lose or earn money. Trading with $100 live will get you more real feeling than trading with $10,000 on demo. It is better to lose $50-$100 than several thousands dollars to learn controlling those emotions.
- Know the behavior of your broker's real account servers. With some brokers, virtual trading is smooth and fast, while a real account brings unpleasant surprises with order delays, requotes, order rejections, slippage, and stop-hunting. Trading with a small real account can save you big money if you are unlucky to stumble upon a bad broker.
- Know your broker's funds handling practice. Do not risk depositing thousands dollars before trying small deposits to see how smooth the transfers go with this broker. Pay attention to the user support if you encounter some problems with depositing or withdrawing your money. If your broker does not take seriously small money deposits/withdrawals, then you should be careful with them. They may be treating big amounts of money the same way.
- Practicing on a small real account has another advantage compared to demo trading – you get the real rewards when you trade right and you get real losses when you do something wrong. This way, you will quickly learn to do everything right and will not be committing the same mistakes again and again.
Demo trading is one of the greatest tools to learn Forex trading. Just do not forget that nothing will teach you better than trading on a real account. But why risk big before being confident in your skills, when you can start with a small-size live account?