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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 practising forex 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. I have explained this in details here: Do You Think You Are on The Right Track to Become a Profitable Trader?

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. Forex makes money. Do not let your mistakes make you think that you can not make money through forex.

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 forex 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.

Make sure to read the below articles carefully:

  1. How To Become a Successful Forex Trader
  2. Are You Still Looking for the Forex Holy Grail?
  3. Do You Think You Are on The Right Track to Become a Profitable Trader?

Are you done with the above articles?

There are a few things about demo-trading I have to emphasize on:

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 forex 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 forex 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, the way that I have explained it here.

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 the way I have explained it here and here.

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 don’t forget to participate in yesterday’s quiz. We are going to learn a lot of things through it.

Also, 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 forex traders do and what situation they have. We can learn from each other:

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"Whether you think you can, or you think you cannot, you are right." - Henry Ford

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41 thoughts on “The Importance of Demo Trading and Your Demo Account
  1. Any

    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

    • 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

      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

    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

    “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

    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

    • 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

    Hi Chris,
    Thank you for this information.

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

  6. Aziz

    i love you site and thank you.

    i recommended my trader friends to visit you site.

    • Hi Aziz,

      Thank you for your comment and welcome to LuckScout 🙂

  7. Alejandro O, Bastida

    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

    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

    • I don’t think if it makes any difference for the demo accounts. You have to ask your broker.

  9. Shalewa

    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

    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

    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!

    • 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 Forex trader.Thanks for sharing

  12. Dharani

    Hi sir, Happy to c this site. i am a new baby. To forex 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.

  13. 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. 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. 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. 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. 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 Forex 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 forex trading.

  18. I just want to share this great experience,
    I have been trading forex 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.

    • 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 Forex 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. 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. Can you tell me how to open a demo account?

  21. 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 forex trading….Alejandro.

    • Alejandro,

      I don’t know what do you mean by “proper way to close…”

      Please be more specific.

  22. 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. 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 forex 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 forex 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


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