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The Importance of Demo Trading and Your Demo Account

I was supposed to analyze the charts I posted on the yesterday’s article, however, I thought I’d better to give a few more days, because I think many of our followers have not read the article yet. I want to wait for all of you to participate. Still I am not sure it is a good training way, but I think it helps. If we see good results, we will repeat this method which is the training article followed by a test. My goal is helping you learn to pick the strong setups and ignore the weak ones. This helps you improve your success rate and become profitable finally.

In this article, I am talking about the demo trading and its importance. I see that some traders believe that demo trading is not a good practice because you know that you are trading with the demo money, and so you don’t trade with discipline. They believe demo trading causes the novice traders not to learn to trade with discipline, and this will be ended to failure finally. When you know you are not trading with your real money, then you don’t care to lose, and so you can make all the possible mistakes, like taking positions with any trade setup (either weak or strong) you see, taking positions while there is no trade setup, over-trading and… . It will be a disaster if these bad actions become a habit in you.

Do I agree with this?

This is true only when you are not a serious learner and you are practicing to trade just to see what it is. So you open a demo account and you take some positions to see how it works. You don’t care if you lose.

However, when you are serious to become a professional and full time trader, and when you want to make a living through trading, then you should behave completely different.

Before you open a demo account and start demo trading, first you should learn everything you need to know.

First complete your knowledge and then start demo trading. Spend enough time to follow the videos and articles I have listed in the above article. If you start demo trading while you are not ready yet, you will only make yourself confused, frustrated and disappointed. Do not let your mistakes make you think that you can not make money through trading.

Now let’s say you have learned everything you need to learn, and now you are ready to gain experience through demo-trading. This is a very important stage that if you don’t pass properly, you will not become successful with live trading.

Aren’t you here to make money through trading finally? If the answer is yes, then you should pass all the stages very carefully and patiently, otherwise you will not get any good result. I can not emphasize on this more. It is very important.

Are you done with the above articles?

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A Few Things about Demo-Trading

1. Take the demo trading as serious as possible. Forget that it is the demo money and nothing happens if you lose. You can blow up your live account as easy as you blow up a demo account. So, when you open a demo account, forget that it is a “demo” account. Treat it as a live account and your real money. Do you like to lose money with your live account so easily? If not, then do not lose with your demo account so easily too.

The discipline you need for trading is something that you have to “build” in yourself. You have to “build” it on your own. And demo-trading is the foundation of your “Discipline Building”. If you trade carelessly with your demo account, you will do the same with your live account too. If you take positions with your demo account while there is no strong trade setup, you will do the same with your live account too. If you over-trade with your demo account, it becomes a habit, and you will do the same with your live account too. If you…

Conversely, if you forget that you are “demo” trading, and you take your demo account as serious as your live account and real money, and you wait for the strong setups only, and you do not over-trade and you don’t take too much risk, and you set the stop loss and target properly, and you care about the losses as you care about losing with your real money, then the discipline you need to have to make money through trading, will be built and matured in you, and you will be successful with your live account definitely.

2. Make sure to keep on demo trading and not to open a live account, as long as you have not been able to repeat your success with your demo account.

Does it make sense to open a live account and trade with the real money while you have not become able to make money with the demo account yet? If it doesn’t make sense, why are you trading with a live account then? You think live trading is different? It is not. When you lose with the demo account, you lose with the live account too. If you are not knowledgeable, experienced and disciplined enough to make profit with the demo account, you will not make profit with the live account too.

If that sounds like you, then don’t be your own enemy and stop trading with your live account. Take a few steps back, complete your knowledge, demo trade to gain experience and master your trading system.

You will always have time to open a live account and start live trading. Don’t do it when you are not ready yet.

3. Your demo account size has to be the same as your live account size. I mean if you are supposed to open a $1000 live account in future, then practice with a $1000 demo account too, and do not open a $100,000 demo account for example. This helps you behave with your demo account exactly as your live account. This helps you take your demo account serious. But when you open a one million dollar account, you know that you are joking. So you don’t take it serious.

Keep in your mind that your demo account has to be treated exactly as your live account. Although you open a demo account for free, but it is not “free” in reality. You are spending your time on it. You are building your experience and discipline with it. So not only it is not free, but it is too expensive and valuable. It is the “foundation” of your business.

OK! This is it for now. Please take the above advice(s) seriously, and read all the above articles I recommended, very carefully.

Please participate in the below poll too. These polls not only help me to know who I am dealing with on this website, but also help you to know what most other traders do and what situation they have. We can learn from each other:

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Demo Trading versus Live Trading: Are They Exactly the Same?

Most novice traders think demo and live trading are the same and a live account should behave exactly like a demo account. If you are still demo trading and you are getting ready to open a live account, you have to read this article to be aware of the differences of demo and live accounts, and demo and live trading.

Demo and live accounts, and so, demo and live trading, have two kinds of differences:

1. Trader Side Differences:

Most traders rush to open a live account after a short period of demo trading and making some successful trades. There is no doubt that everybody loves to make real money as soon as possible. But, few successful trades in a demo accounts doesn’t mean that you are ready to start trading with real money. Working with real money creates some harmful emotions in novices traders. These emotions cause them to behave completely different when they trade with a real account. There is more fear and greed in novice traders when they trade with a live account, whereas they treat the demo accounts more like a computer game.

If you want to trade a live account without any emotions, first you have to demo trade at least for six consecutive months after learning a trading system. You have to master your trading system through demo trading. Then, if you can trade profitably for six consecutive months, it means you have almost mastered your trading system and you are ready to continue your practice with a small live account.

To become able to trade with your live account without any emotions, you have to take your demo account as serious as a live account. You have to forget that it is a demo money. If you are supposed to open a $5000 live account in future, then you should practice with a $5000 demo account too. Working with a too big demo accounts, for example a $1,000,000 demo account, means you are not taking it seriously, and you are playing with it just for fun. This is a big mistake that a novice trader can make. Your demo account and demo trading journey is as serious as practicing with a flight simulator for a student pilot. If he doesn’t take it serious and doesn’t become able to work with a flight simulator properly, he will not be able to fly with a real plane: The Importance of Demo Trading and Your Demo Account

When you master your trading system through demo trading, you can trade with a small live account emotion free, exactly like what you have been doing with your demo account.

The most important advice here is that don’t rush to open a live account as long as you are not a consistently profitable demo trader yet. If you are able to repeat your success for six consecutive months at least, you can open a small live account and “keep on practising” your system with it. When you can trade with this live account exactly as your demo account, and you repeat your success for six consecutive months, you are a junior profitable trader.

What next?

2. Broker Side Difference:

Let’s say you have been able to repeat your success with your demo account for six consecutive months, and now you want to open a small live account. Will your live account behave exactly the same as your demo account when you want to open and close positions or there are some differences?

If you open a live account with a market maker broker, which is what I don’t recommend at all, then you should expect to see some strange events like sudden increase of the spread to hit your short positions stop loss (stop loss hunting), slippage, re-quote, off-quote and… . These are the problems you can be faced with, even when the market condition is normal and there is no news release. Therefore, it is recommended to find a true ECN/STP broker who is honest and allows its clients to know everything about their liquidity providers, commission and… .

What if you open a live account with a true ECN/STP broker? Can you expect your live account to work exactly the same as your demo account?

Most novice traders expect to see exactly the same performance with their live accounts, but this is not possible. When you demo trade, your orders don’t have to be transferred to a third party. You are trading with the demo money on the broker’s servers. Indeed, there is no real order in demo trading. Although you analyze the market and locate the strong trade setups, it is just some numbers that are displayed on your platform when you click on the buy/sell buttons. You can take from 0.01 to 1000 lots positions without any problems, because there is no difference between a 0.01 and 1000 lots position in demo trading. They are both fake positions.

However, when you trade with a live account with a true ECN/STP, they have to transfer your orders to a third party which is called liquidity provider. When you click on the buy or sell buttons, your brokers receives your orders on its server first, and then route it to the liquidity providers servers through the electronic bridges that connect the brokers servers to the liquidity providers servers. Although all the stages of this process is done electronically and automatically, it still takes time for the liquidity provider to receive your order. And, the price can change during this time. By the time the liquidity provider receives your order, the price can be much different. Liquidity providers execute your orders with their own price, not the price you request. If the price is too far from the price you requested, you can receive off-quote error. This is what you see even with a demo account, when there is a news release and the price is changing like crazy, because even with a demo account, the broker has to receive and execute your orders on its demo servers, and the price can be different when the broker receives your orders.

So, some slippage is normal when you trade with a true ECN/STP broker. Also, you should not expect your pending orders, including stop loss and limit orders, to be executed exactly where you set them. They can be close, but not exactly the same price you set.

To have a better performance, some brokers do two things:

First, they connect to several liquidity providers at the same time. When they receive your order, their system checks the price that each liquidity provider is offering, and chooses the liquidity provider that is offering the best price which is closer to the price you requested. This cannot eliminate the slippage completely, but it can lower it significantly.

This method has another advantage too: Your orders will always be distributed among several liquidity providers. Therefore, none of them will be able to know your account as a winning trader, because not all of your winning positions will be taken with one liquidity provider. This prevents the liquidity providers from planning to manipulate your positions.

Second, most strong and good ECN/STP brokers hide the pending orders from the liquidity providers, to prevent them from slipping the price when the pending order wants to be executed. As soon as the price reaches the pending order price, the broker sends the request to the liquidity provider that is offering the best price.

Demo and live trading cannot be exactly the same from the brokers and liquidity providers point of view, but they can be exactly the same for you as the trader.

Taking a position with a live account is like referring to a bank branch and buying a currency against another one. They offer you their own price; you have to spend time to do it, and you have to pay the fees and expenses. The difference is that in online currency trading, all the stages of this process is done from home and through computer and the Internet. So live trading cannot be exactly the same as demo trading. This is what all professional traders know and are used to.

In spite of the technical differences that demo and live trading has, you can trade with your live account exactly the same as your demo account, if you practice enough with your demo account to master your trading system first, and then you open a small live account with the money you can afford to lose when you have already mastered your trading system and have built your confidence and discipline.

How to Sign Up for a Demo Account on MT4

Most of you know how to sign up for a demo account on MT4, but many others ask about it. So I preferred to have a post on this topic.

I hope you have already installed the MT4 platform on your machine:

1. Open the MT4 platform.

2. Refer to “File” menu at top left side of the platform.

3. Click on “Open an Account”.

4. Click on the “Next>” button.

5. Choose “New demo account” and click on the “Next>” button.

6. Complete the form, and check the “I agree to subscribe to your newsletter” checkbox and click the “Next>” button.

7. Save your login, password and investor (read only password) and click on “Finish”. MT4 will login to your new demo account automatically and you can start trading.

You can sign up for another demo account if the current account is expired or wiped out. All your demo accounts will be listed on “Navigator” and under the “Accounts” menu (press Ctrl+N to open the navigator). You can have unlimited number of demo accounts with the same broker.

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40 thoughts on “The Importance of Demo Trading and Your Demo Account
  1. Any says:

    Hi,
    In my opinion demo trading has almost nothing to do with real trading.
    You can’t swim without water even if you visualise that you are swimming. When there is no stress you can’t simulate that you are under pressure of stress, it is impossible. For beginners losing real money is big trauma. This trauma doesn’t exist if he or she loses virtual money. When you are stressed your body cells secrete adrenaline. This adrenaline changes everything, it prepares your body for fighting with an enemy, runing away or…. Psychologists say that when you are under the influence of stress you don’t see alternative. The same is with exams. Why we feel that our head is empty before an exam? Because of stress. What we feel when an exam is finished? We are comfortable and know everything. Every couch knows that young sportman must take part in competitions, the more often the better for his career. Why? To familiarize this young man with stress, the earlier the better. When there is no stress one can’t familiarize his psyche to cooperate with it. Demo trading is as learning to swim from a book in empty swimming pool.
    In my opinion if one has learned what you wrote about, hi or she should start real trading with the smallest account. This real trading is not trading, it is learning. This is my opinion.
    Best regards
    Any

    • Chris says:

      Hi Any, I like your point of view. However, if you read the above article one more time, you will see that I was trying to say that if traders don’t take demo trading as serious as live trading, it will be useless. It works only if you take it as serious as live trading. You should forget that it is demo money.

      Demo trading is like “flight simulator”. You know that nothing happens if you hit a mountain. But you don’t do it, because it will be a negative score for you as a student.

    • Chris says:

      hi,
      although i agree for the most part i found the only way to learn properly is to feel the losses on a live account. they were my best lessons and very important ones. You can trade with lot sizes of small amounts just to get conditioned to losing trades and then work your way up to larger amounts. once you can achieve a positive result mentally you will begin to progress at a faster rate. You cant teach yourself the psychological and emotional barriers that you need to achieve on a demo account. however trading a demo account shows you how you should react to losers and winners hence if we can apply the same mindset to live trading as we felt when trading on demo then its successful to relate back to how we behaved on the demo platform and then train our minds to apply that formula to live trading. in that way the demo account will work for you .

  2. okeke says:

    Chris, Thanks for the article. I intend to start real live trading with $1000 since that is the sum I can realistically source for. But I’ve been practising with a $100,000 demo balance. I’ll close that account and open a new one with a $1000 demo balance. Thanks for the advice.

  3. ash says:

    “Although you open a demo account for free, but it is not “free” in reality. You are spending your time on it. You are building your experience and discipline with it. So not only it is not free, but it is too expensive and valuable. It is the “foundation” of your business.”

    This is a great way to think about Demo accounts – thanks for sharing your perspective with us Chris

    Ash

  4. Otto says:

    Hi Chris,

    I thought I share my first demo performance. It was a 2 week demo account.
    Risk: 2% each trade
    Trade count: 8
    Final profit: 7.03%
    Success rate: 62.5 %
    Profit factor: 2.09
    Most of the trades were 1:1, one of them 1:2
    I am not too satisfied with the success rate, try to make it above 80% at least.
    And also try to make less trades, but with more reward.
    Also will leave a part of the position open without target, as you do.
    I plan to demo trade at least until the end of this year. I hope I will do much better by then.
    What do you think about this?

    Thanks
    Otto

    • Chris says:

      Hi Otto, I believe you are on the right track. If you wait for the strong setups only, you will see that your success rate will go much higher. Keep up the good work.

  5. Kolawole Mabawonku says:

    Hi Chris,
    Thank you for this information.

    My question is, which is the best method to trade in short time frames?

  6. Aziz says:

    i love you site and thank you.

    i recommended my trader friends to visit you site.

  7. Alejandro O, Bastida says:

    Thanks a lot Chris of your very important advices; I wished I can start demo trading by next month but the problem where I can find a broker in which accepts small amount of cash for start up/registration; Is there any brokers who will accepts $100.00 for registration and allows 3 to 6 months demo trading?
    Somebody who like to give tips for a broker you can send message to these email: [email protected]

  8. Miche says:

    Hi, I opened a demo account, but they asked what commission price to take: “exn limit” or “exn spread”, what option do you suggest to take?
    Thanks

  9. Shalewa says:

    Thanks for the article Chris. I am learning day by day. I like your site because you use candlestick (a trader I copy use it and recommended it) and I intend to stick to candlestick with BB. I am presently going through the ‘5 steps….’ again as it appears I rushed through and left some articles out of my study plan. Please what is the leverage and lot size you will advise that a novice trader should trade with when $1,000/$2,000/$5,000 is the demo capital?

    Thank you.

  10. Shalewa says:

    I have read the article on leverage, margin balance, equity, free margin severally. I understand it but I still don’t really get ‘leverage’ totally combined with lot size. Please any advice? Thank you very much.

  11. Kerry says:

    I think demo trade accounts are the only way to start. I see people talking about how demo accounts do not cause you to feel the emotions that you feel when you lose real money. This is true and is its own learning experience that also has to be gone through. My demo account is teaching me how I trade and what greed and fear look like when I trade. Or what it means in my mind to revenge trade or trading overconfident. It is as important to learn what these things look like in you as it is learning what a 100 score trade set up looks like. Only when you achieve this can you trade live and learn those skills with any hope of success.
    Anyway thanks to Chris and the whole team for all that you do! This site is GREAT!

    • Arin Davidian says:

      Hi Kerry
      I was one of the people who was thinking demo account is a waste of time and it has nothing to do with real account.But now i am 100% convinced that starting with Demo account is the only way (I MEAN IT. THE ONLY WAY) to become a profitable trader.Thanks for sharing

  12. Dharani says:

    Hi sir, Happy to c this site. i am a new baby. To but my friends. Are saying its a waste of time and type of gambling. Don’t waste ur time. plz suggest me can i enter. With strong confidence.

    • Chris says:

      I cannot say your friends are completely wrong. Not everybody passes all the stages and become profitable. Most people waste their time and money without any success. Those who start from the right place and follow the right track are lucky to become profitable traders. Please take a look:
      https://www.luckscout.com/become-a-profitable- -trader-in-5-easy-steps/

  13. Vincent Wayne says:

    I trade on a live account but whenever I feel I need to iron out some bad habits or practice, I use a demo account. Gives invaluable lessons.. Thanks Chris

  14. Oesha Roopram says:

    I also think that its a question of how much time you are prepared to spend on your education and demotrading. When you take the demo seriously it will pay off.

  15. Nir Antman says:

    Just feel like sharing,
    Well after one year of trading a small live account, winning and losing, winning and losing, and not been able to become consistently profitable I decided to open a demo account and take it as serious as I can.
    Made a strong decision to follow the rules strictly and see how it goes, I don’t feel like I wasted time, its just that I didn’t read Chris articles before 🙂 but I sure learned a lot.
    I gonna follow the rules like a straight ruler and I’m sure that it will come to fruit sooner than later.
    I was so confused at the start cause it felt like demoing is going backward instead of forward but after A few losses the market told me – “listen to Chris” ha ha..
    So – thank you Chris, the goal of becoming consistently profitable sure aint easy for me personally but my motivation is strong and I’m confident in myself that I will make it.
    Have a great weekend All and again thank you and the wisdom that you share with us Chris, you’re a natural mentor and we are lucky to have you.

  16. Amir hossein Sh says:

    Dear Chris
    I’m reading your site about a week but it would be better to say that i’m sleeping on it…your site is the perfect and complete source that I’ve ever found. I’m doing technical analyises for about two years but I just found out how unfledged I was.
    I just closed my live account and in this week I’m going to start my demo account with the trading strategy you have learnt.
    Thank you very much about your site and keep on going…

  17. Arin Davidian says:

    Hi Chris
    When i started reading your Articles about 3 months ago,i couldn’t convince myself to trade demo account.Now I am 100% convinced that opening a demo account is the only way one can start to trade real account.I have lost and suffered a lot in and stock market.So there aint no time or mind for me to continue my old wrong ways.
    I truly believe if i cant have discipline in demo trading i can never ever trade live account.convincing myself to trade demo account has been one the main challenges i have faced during this 3 months.
    Thanks chris for your emphasize on demo trading.
    I feel i am on the right track for the first time in trading.

  18. Kan Integrity says:

    I just want to share this great experience,
    I have been trading since 2007, i have use both fundamentals and technical, i even use signal.
    Well after some years of trading live account, with winning and losing, winning and losing,on and off and not been able to become profitable, i almost gave but whenever i try to give there is an inner spirit that always tell me that i have not gotten the right strategies I decided to open a demo account and take it as serious as I can and at the end i still did’t profit from it.until i came across Chris site, i confess this site as been marvelously great and rewarding.
    I have taken my time to read almost all Chris Message or rather strategies and they have been a blessing to me because i have been taking my time to follow them as he state them and i equally follow that of Kamal.
    I decided to open a demo trading since June this year and i have been following the system that i read from Chris articles, in the month of june i made 34% profit, in the month of July i made 30% profit and in the month of August i made 40% profit and this month of September i am already making 100+% profit, all in the demo trading.
    Please i want to know if i can now open live account after this month of September?
    i want to use this opportunity to thank chris for taken his precious time to put up all these articles that have been of great help to me. God bless You.
    Thanks once again.

    • Kan,

      Congratulations! 🙂

      I would keep on repeating my success for a few more months. It never becomes too late to open a live account.

    • Arin Davidian says:

      Kan
      Thanks for sharing this.it gives me and many others when we see people succeeding here with the way Chris teaches us.After all the ups and downs you had in you are starting to feel you are doing good.So great to hear that.Its a real motivation for people like me who has just opened the demo account after loosing money in the real account. Thanks

  19. Solomon onyemes says:

    hi chris

    i started demoing on july 21,from then till September 11, i have turn the 10k they give me to 16k is that a good sign..
    and again i use stop loss early on,but it does not favor me since then i analyse and i just enter trader without stop loss and since then i make profit consistently,am thinking of a way to put stop loss in my order..i need your advice..am new here..

    • Solomon,

      Trading without stop loss will make you wipe out your account sooner than later. Just a bad trade can blow up all the profit you have made, unless you are disciplined enough to close your losing positions on time and before it becomes too late.

      You have to force yourself to set a stop loss. If you know that trading without stop loss will ruin your account, you will do it. So try to believe this.

  20. amr ghanem says:

    Can you tell me how to open a demo account?

  21. Alejandro Bastida says:

    Hi Chris,
    Based on your above reply to Solomon that “unless you are disciplined enough to close your losing position on time and before it becomes too late.” I ask an apology if I ask you on how to make a proper way to close it if that is the case.
    And one more Chris, supposing (in my demo trade) I have enough profit and contented with it; how to execute or how to make an exit for it?
    Thank you so much Chris. And I’m sorry for being very late bloomers in terms of trading….Alejandro.

  22. Olawale LAWAL says:

    Demo trading is not a waste of time. It’s like a sportsman doing exercise and practicing to perfect his skills before a competition/contest; is there a sportsman that just go into a contest without practice.

  23. Nimesh De says:

    Hi Chris,
    First of all let me thank to you for sharing your valuable knowledge and experience. I come across Luckscout accidentally while i was looking for some genuine and comprehensive trading educating website and Luckscout became the best place for me along with few better sources.

    However now im using a demo account around 2 weeks analyzing how market works while getting familiar with MT4. I have made some positions in order to practice how it works, such positions not supposed to have P/L. So my question is when i do genuine trading in demo what are the calculations or checklist that use for measuring the success before moving to the real trading?

    thanks in advance
    Good luck