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  • A Demo account can be the best learning tool, but most of the times that potential is not fully realized. Paying attention to the 3 reasons outlined here by Mathew is the first step towards learning more about how to leverage a Demo account.

    • Bernhard Hoffmann

      The only way to learn is to trade a real account !!
      I did it by starting long time ago with a real
      Oanda trading account and have never regretted it.
      You learn money management skills and handling the
      correct leverage. Greed to make big money in a short time is the biggest enemy in this business !!!
      Who he isn’t aware of this rule No. 1 will be killed soon by Mr. Market !

      • As a trader myself Bernhard I know these rules all too well, and anyone who tells you otherwise is lying. Thanks for the post!

    • Thanks for your comment Alfonso.

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  • Arif

    Nowadays some brokers offers cent accounts. I think these cent accounts can be used as demo account with little balance ( As little as 1$ = 100 cent).

    • Arif – Your comment is timely and something I address on Monday’s post actually. Be sure to read it. I’d love to hear your thoughts after you read it.

  • Matthew, what’s wrong or dangerous is not the demo account, it is quite the opposite. The problem is not being able to trade with a trading plan and not taking your demo account seriously. There is no replacement for not trading with rules and demo accts are the most appropriate setting for learning. I encourage traders to have a demo 1 and demo 2 accounts, one for real-like trading following strict rules, and 2 for experimentation.

    • Javier, you are exactly right, but remember, most demo traders are new to trading and have no understanding of what emotional tides await them when they go live.

      How do you prepare for something you dont understand?

      There is a better way coming.

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  • Peter

    Personally I feel there is a lack of discipline and seriousness in using demo. After acquaintance for a few months I used live account trading micro lot as demo. It is painful but progress more effectively

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  • Bruce Mars

    This has been most probably, the dumbest article ever written. I started FX @ 5 yrs ago and traded demo for over a year. I forced myself to take every trade seriously. I sweat blood just like I did when I opened a mini account and also playing full contracts now. I presume to think your rendition is to “protect” newbies from themselves. That’s crap. If ppl don’t step into this arena focused and serious and causious….I will gladly take their cash. My respect is to my brothers and sisters I trade against who fight for their coin like I do. This forum is for deliberate, coordinated attack upon the market. If you aren’t ready for war, then get out!

    • Hi Bruce,

      Thank you for your comments.

      I like the war analogy and actually just wrote an article about John Boyd’s “OODA Loop” I think may interest you (deals with strategic decision making as a fighter pilot):

      http://trading-wheels.com/an-f-16-ooda-loop-and-your-trading-plan/

      Though if you dont like my writing a quick Wikipedia look up may be better.

      Congrats to you on successfully converting from demo to live – you’re an inspiration to many.

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  • Bruce,

    I am definitely biased because I have chatted with Mathew about his project so I know where he is going with this post. I agree that traders should not call themselves that until they have experienced the market. A demo account is only a tool that can be beneficial if its used with discipline and the right frame of mind to capture the lessons learned.

    I second your thoughts on expecting other traders to be ready for anything, and trust me Mathew is working on giving would be traders the tools needed to turn a Demo account into an integral part of their trading journey making sure the lessons stick and they can be welcomed into the brotherhood/sisterhood of forex traders.

  • DV

    I totally disagree with the article above,

    I have traded for 5-6 years and still use a demo account extensively for testing a new strategy or back testing or understanding a new platforms order entry system….

    For learning the platform, and forward/ back testing a strategy in real time there is no comparison!
    It is crucial to understand the platform nuances/ position sizing etc etc
    As well as seeing if you have an edge at all!!

    What you are suggesting is that simulation is useless, why do pilots spend tons of hours in a simulator before flying a commercial plane or golfers spend thousands of hours at a driving range perfecting their swing?

    The article above is a complete misnomer,
    If you don’t take trading seriously demo or live and have a clear proven plan, you will hand your account to people who do… period.

    Trading is a high performance activity, if you don’t believe you are competing directly with the world’s best you are deluding yourself

    • Hi DV,

      Thank you for the comment. I was not able to reply earlier as they shut down the comment section, but have since opened it back up.

      As to your points – you are completely correct that demo’s can be very useful for position sizing, learning the GUI, back-testing, etc – however they are also quite dangerous in giving people a false sense of security in themselves once they have adequate skin in the game.

      My purpose was to open up dialog in this as I believe there is a better way than the choices traders have now. I actually had another article that tied this all up but it was not published on this site (ill work on that so this all makes more sense).

      Finally in referencing your example, consider this:

      Why did Phil Mickelson choke in the 2006 US Open when he needed a bogey to win? He’s practiced all of those shots a million times? Why do golfers miss 1 foot putts for a win, or excellent free throw shooters miss 2 shots in a row to clinch a game? You get the rest… All of this has to do with emotions and learning how to deal with them when in counts.

      Practicing your putts, free throws, or drives is technical but long term success is much more than that.

      Thanks again.