Why Forex brokers’ clients always win on demo but lose on real accounts
Frequently, because there is no money commitment, the results the traders obtain when they trade with demo accounts are by far different from the outcome of their trades on live account. Even a Forex broker’s client that does very well on a demo account cannot guarantee success on a live account. These differential results are frequently as a result of lack of fund commitment on a demo account. When you are risking a certain amount of money on live account, it conditions your mind better than when you have no funds at risk.
Forex Brokers and Their Clients
Possible occurrence of this variation needs to be put into account of a Forex company when you are trying to determine how successful a trading strategy is or the quality of services offered by a Forex broker you are testing out their services. The main reasons for the occurrence of such variation of results between live and demo account Forex trading can be classified into two key groups: Some Forex brokers’ clients connected to execution strategies and protocols while the rest are connected to the trader’s mindset. We will talk about each of these two classes below:
Trade Execution Connected Variations Between Live and Demo Accounts
The possible cause for the trade execution variations between lives and demo account trading can be any of the following:
- A Forex brokerage company may not offer price requotes to a trader with demo account, but they may frequently requote live prices in standard trading practice.
- The price feed and dealing spreads of a broker’s for demo account may vary from the pricing that is offered for live trading accounts.
- The Forex broker may implement demo stop loss orders correctly, but significant slippage may happen in a live trading scenario.
- Forex Broker mistakes which occasionally occur during trading can be a huge cost in terms of time, energy and even money to the trader when the trader seeks for a resolution through the customer service personnel of the brokerage company. Majorities of traders may not witness this type of mistake or hiccups when trading on demo account.
- Occasionally, Forex brokers offer a different trading platform for demo account and the real trading account for live account differs considerably. This requires the trader to learn and get used to new trading platform when he or she opens up a live account.
Trader Connected Variations Between Live and Demo Accounts
Trader mindset problem may be the possible cause of the following trade outcomes between live and demo account trading:
- Due to lack of emotional dedication because there is not money involved, it leads to an unrealistic positive trading scenario when trading with demo account than when the trader has committed some of his funds in live account.
- A trader may go against his their trading plan without facing any real cost consequences with a demo account. Thus, the trader may lack discipline which will result to loss of money in live account trading.
- The trader may possibly overtrade or inaccurately estimate his or her risk in a demo account. Moving on to live account with similar mindset would cost the trader his investment funds as a result of negative outcomes.
How Beneficial is Demo Trading?
As a result of psychological element that is not attached to trading with virtual money, demo trading cannot correctly estimate an individual’s trading capacities. Nevertheless, it can offer great advantages to the trader when testing trying to test the way a trading plan will perform while providing some educations to traders.
When you want to use a demo account for instructional reasons, it offers newbie a risk-free head-start in the foreign exchange market. Also, you can experiment strategies without incurring assuming any risk even if these same strategies are replicated in real-time trading situations.
In conclusion, trading in a non-expiring demo account with a FX broker offers great protection to starters which they would without it have to learn it by risking real fund. Again, trading a demo account offers you the chance to know how to monitor the market closely and allows you get a good idea of the way the Forex market functions. The whole of these risks occur without putting any real money.
Open a Micro Account in place of Demo Account
To solve some of the causes of the variations in outcomes differences between live and demo account stated above, traders can select micro or mini accounts with the Forex broker, and fund it with a minimal amount of money instead of going big when starting out. This way, they will be able to try out the Forex broker or trading strategies the same way it will be replicated when they start trading big without running into a huge risk.