Forex Demo Accounts: A Waste of Time or a Good Way to Learn?

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I was all set to sign up on a popular forex trading website which promised that I’d be trading within 5 minutes and that they would have lots of people to answer my questions and then I saw it. “We do not offer Demo Accounts.”

I’ve gotten conflicting advice on whether to open a demo forex account before beginning to trade forex for real. Some people say why wait to begin trading forex for real, I mean you don’t want to earn pretend dollars, do you? You want to start making money via trading as soon as possible, unless of course….. you lose money at the beginning.

Or others say that there is no point to trading via a demo account because you KNOW the money in your demo account doesn’t matter. They argue that you might just as well claim that you can learn about real estate investment by playing Monopoly.

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I think that this line of reasoning has some value, BUT there are two important counter-arguments.

Adam Burgoyne has said he believes a new trader should aim to trade a full month profitably on a demo account before trading for real. If you think about it from the point of view of, if you can’t follow your plan and make money when you aren’t worried losing money or salivating with greed, then what chance do you have when fear and greed are involved? If you can’t make money with a demo account, why would you actually place real money into the account? Wouldn’t that be like betting on a horse that you had never won a race in his career? And wouldn’t skipping the step of operating a demo account be a bit like betting on a horse that had never run a race? One that had no “track record?” Get yourself a track record with a demo account first, then decide whether to involve real money and you could save yourself some real heartache.

That being said, let’s go back to the argument that says success with a demo account means nothing because the most important factor in trading success is whether you can handle the pressure of real profits and losses. Try and obtain the best of both worlds. Trade a demo account, but make it a duplicate of the real trading account you plan to open. If you only have $1000 to trade, trade that amount in your demo account. If you are planning on taking the $1000 out of your savings account, consider actually taking $1000 out of your savings account and placing it in a 30-day certificate of deposit. Then act as though the $1000 in that demo account is really your $1000. Make your decisions as though the demo account dollars are real.

Sure trading with a demo account might tell you nothing. But if you take your demo account seriously, it can save you potential losses and be a valuable learning experience.

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