One of the most common questions that new traders have is: how long should you use a demo account? My approach stands in contrast to what you usually read on most websites, but I also think you can not listen to the common advice. 99% of all traders are reading the same things, get the same advice and follow the same path – and they all lose money. It is time to think differently.
No questions, demo first!
In order to improve their technique, one must first start with demo and stay in demo market for at least 2-3 months. The biggest mistake people make is they get stuck with the demo trading. To trade on demo for too long, destroy your way to shop.
The purpose of the demohandeln
In order to succeed with your goal, you need to ask yourself: What is it you want to achieve – so that you can know when you reach those goals and can continue with the live trading. There are three main things you must be able to:
1) Understand the platform
Especially new traders – it is important that you are aware of your trading platform. You should try every button and test all the features on your platform. Think about how you use your platform.
Depending on which market you shop at, you have to make sure that you understand the different ordertyperna. Demo is the perfect place for it, because your actions do not have negative consequences.
Try to understand the difference between market and pending order. How does your SL? How can you place stoplossen and take profit, and what happens when the price hits those orders?
Try all the different types of orders and observe what happens. You understand very quickly what the different orders are doing.
3) Get a feel for the market dynamics
This part is vital in order to avoid big losses and unnecessary handelsfel. Note anything that catches your attention.
Some important questions:
When is the price the fastest?
Do you see the difference between the price movements of different markets, currencies, timeframes?
What time frame works best?
How you investigated how a specific news affects the price movement? What news is most important?
What kind of behaviour do you choose?
You will see lots of gaps? How can you manage them?
A little bit about demohandel
It is important to understand the limitations and what you can and can’t expect of them. Read the paragraphs below.
1) Validate your system
One of the most common mistakes. You can’t validate your method of trading and the profitability of your trading strategy on a demo account. It doesn’t matter how good your results are. This means NOTHING when you switch to a live trading account.
You can build up your self esteem and your confidence, and you’ll learn how to perform your business within the framework, but the demo-and the result can never replace a live trading results.
2) Prepare you for live trading
Demo and live trading are two different things, and from a purely handelsperspektiv has nothing to do with each other. The biggest challenges we all face is the emotional nature.
Cons of the demo:
No tryckhantering and/or uncertainty
No emotion makes you act. You lose the for a longer time and lowers your profits
FOMO, you go in too early (you want to earn more money)
Many traders will argue that it is enough to treat your demohandel in the right way (with real money). But it is not possible – you can’t fool yourself so easily.
The biggest risk
The biggest problem is that the trading behavior becomes a part of the general approach. A trader who is not punished and who does not feel the pain is more prone to lose their money.
From demo to live trading
Now, when you know what you should do, you will get some tips that will help you make a smooth transition from demo to live trading:
Start with small money
Trade with money you can afford to lose.
At the same time, you must make sure that the money you lose is worth it. It means that you know why you lose and what you can do to stop it. To lose money but to learn something is just a waste of time.
Protect your capital
You will inevitably lose money the first few years, but protecting your capital is even more important. A trader, who loses his motivation, becoming too negative and frustrated.
It is good that you have realistic expectations of what might happen. Enjoy the process.