DEMO ACCOUNT TRADING "THEN" LIVE ACCOUNT TRADING NOT "VERSUS"
There is a very popular/dangerous opinion regarding Demo and Live Trading going around in the Forex Community that will only lead to disastrous results for traders who follow this misguided view. It is the view that since Demo Accounts do not involve real money under "real" market conditions, it cannot adequately prepare you for Live Trading. People who believe this say that you should therefore open a Live Account so that you can get a "feel" for what Live Trading is about and therefore have a better performance. They also add that if you are on a Demo Account, you will not take it seriously and that Live Trading will somehow "force? " you to trade seriously and thus more profitably.
Unfortunately, this is very far away from the reality of Forex Trading and life in general. New Traders need to stay away from these types of opinions which will only lead you down a path of failure if you do open a Live Account without adequate preparation and practice on a Demo Account.
SUCCESSFUL STRATEGY VS EMOTIONS & LUCK
I believe that persons who push these types of views also believe that success in trading is more about emotions and instincts rather than having a robust Methodology that works. It is almost as if they are trying to justify rushing into Live Trading without being successful FIRST at Demo Trading. This is a recipe for disaster both in trading and in the real world. Here are a few examples.
1. A Scientist making a Presentation in front of an Audience of 5000 Persons.
2. A Professional Athlete who plays in front of 100,000 Spectators.
3. An Airline Pilot responsible for hundreds of passengers each day.
4. A student preparing for an important exam.
Do any of these persons dare to perform without adequate preparation in some form of simulated environment? I think not.
Everyone around the world who falls into these and other categories has to go through a serious amount of preparation under simulated conditions before "game time". Otherwise they will fail. Regardless of how competent a scientist is, he/she has to practice over and over before presenting otherwise he/she will come across as nervous, incompetent and will be unable to comfortable handle unexpected problems, glitches and questions that may arise.
An athlete has to go through arduous levels of training each day in order to be ready for his/her weekly performance. No amount of natural talent is going to cut it. Coaches have to go over their game plans with their athletes every time they step on to the training pitch so then when the big game comes, they will rely more on their strategy rather than emotions or luck to get the win.
Airline pilots must go through several stages of preparation, test flights, simulators etc. in order to become a pilot. Otherwise they will not be able to handle the important responsibility that comes with this important job. When it comes to the unforeseen circumstances, they will be better prepared to handle them on behalf of their passengers and crew without breaking down under pressure.
All of us have had to do an exam in one form or another. Whether its to get your Drivers License or the Bar Exam, you had to study and practice with very little sleep before that exam day comes. This is why you were successful and if you weren't, in most cases, it was because of inadequate preparation. There were perhaps other times when it had to do with the arrogance we have had that we didn't need to prepare and were given a rude awakening when we couldn't perform as we had thought.
Now, it is true, that you cannot prepare for every single thing that you will face in the real environment. I agree. No argument there. But the greater the preparation that you go through under different scenarios, the better able you are to handle the unexpected and to minimize the impact they have on your results.
Going back to the chart, if preparation is not taken seriously, then this is what is faced by traders when on a Live Account.
Emotions, including fear, hope and stress will play a much greater role in your trading results. It will feel as if the market is moving at 100 mph and that Live Trading is totally different from Demo Account. Your results will also be more dependent on luck working in your favour rather than well-thought out trading decisions.
These experiences are what feed the view about Live being different from Demo. It is only when emotions play a greater role than a sound trading strategy that it will feel different. After all, what is the difference between a 198 Pip move on a Currency Pair on a Demo Account versus a Live Account?...
....nothing really. The only difference is one is real money one is fake. But to get the real money, you HAVE to practice getting the fake money first.
PRACTICE MAKES....NOT LOSING YOUR MONEY!
As we see everyday of our lives across all professions, constant practice and taking your preparation seriously is the only way to be successful. If this is not the case then you are only asking from problems later on down the line when you have to show results.
This is why I encourage Demo Account traders to achieve a 100% Rate of Return target by following my trading on my Live Account. Having this type of target provides you with a precise target to achieve so that you know exactly when you are ready. You will be able to handle various scenarios that can test your character as a trader, by implementing certain safeguards to prevent emotions from taking over.
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(M.Sc. Economics, B.Sc. Management and Economics)