Opening a Forex Trading Account: Live Vs Demo Trading Account

After selecting the best Forex trader, you will need to open a Forex trading account with them. The process is easy and involves choosing an account type, registering and activating the account.

Most experts and professional Forex traders usually advise novice Forex traders to first open a demo account before moving on to live accounts.

Demo Account Vs Live Account

Live Forex trading accounts are real accounts where Forex is traded in real-time. Here, Forex traders buy and sell Forex using real money. In a live trading account, one can either make profits or losses depending on their trades.

Demo accounts are virtual simulated Forex trading accounts complete with all requirements and environment similar to a live trading Forex account. The only difference is that no real money is traded, earned or lost.

Here the trader can buy and sell Forex and make profits or losses but no real money is actually exchanged. The main aims of demo Forex trading accounts is to;

� Help new Forex traders learn how to trade Forex without risking their money

� Gives traders a real-time experience and feel on how to trade in Forex

� Help traders try out various strategies and come up with effective strategies for live trading

� Used by new traders to build confidence and motivation before moving to live trading account

Difference between Demo Accounts and Live Trading Accounts

In practice, it has been shown that successes achieved when trading in a demo Forex account may differ significantly with those from a live trading account. This difference in results is attributed to a number of factors including;

� Lack of real money mindset

� Emotional differences

� Risk and caution

Lack of Real Money Mindset

Because there is no money lost in demo accounts, traders tend to have a mindset of having nothing to lose which make them try out different strategies which either fail them or result in success. In addition, there is no pressure if they make costly trading mistakes.

In live accounts however, no trader is willing to try out a strategy that they have not used before for fear of losing their money. In case of trading mistakes, traders feel the pressure to recover their losses thus clouding future judgments.

Emotional Differences

Even though Forex traders try to eliminate emotions when making Forex trading decisions, trading in live accounts may sometimes result in nervousness and a flood of emotions to traders as they become tense when making such crucial decisions.

This is because wrong decisions would result in them losing money. In demo accounts, there are no emotions in play.

Risk and Caution

While in demo accounts taking risks and being less cautious might end up making more profits, live accounts traders are less willing to take risks and are very cautious on the trades they make.

In live trading however, potential of traders making more money can result in taking unnecessary risks. Risks in live trading might result in committing trading sins like cutting off your winnings, revenge trading and moving stop-losses

This differences between live and demo trading accounts can be dealt with by reducing trading mistakes and sins, focusing on your trading plan and not the money even when under pressure and being prepared for emotionless state of mind when you switch to live trading.

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