I get a lot of new traders asking me when they can start to live trade. That can be a difficult question to answer because it relies heavily on your experience.
How do you get that experience?
Demo trading.
There is a less than favourable outlook on demo trading for the simple fact that you can’t make money with it. A lot of people essentially think that you are playing with fake money if you demo trade.
That is simply not the case. Demo trading is integral if you are to be a successful trader.
Trading is all about the long-term. Countless traders will jump into Forex excited and full of optimism about their new venture. And then a year later, I won’t have heard from that same trader for months.
Why?
It’s because they have lost money and made a decision that trading is not for them.
It is such a shame whenever that happens because there are extremely simple steps you can take to prevent this exact scenario.
Demo trading is the key.
Here’s why…
If you demo trade the right way, you will save yourself time, money, and effort.
Save Money
Firstly, money. Let’s say you demo trade for up to 3 or 4 months. That’s a short time to demo trade. You then trade on your live account only to find that, after 6 months, you have experienced heavy losses on your account.
You are now in a situation where you have lost a chunk of money and are feeling hopeless.
You could go back to demo trading. In fact, you should demo trade if you had less than 4 months of demo trading experience under your belt.
We demo trade so that we can become profitable traders before we risk our own capital. There is simply no reason to trade on a live account when you don’t have enough experience trading.
Reduce the money you lose from your mistakes and spend quality time trading on a demo account.
Earlier, I mentioned that trading is about the long-term. Unfortunately, a lot of would-be traders don’t even reach past the first two years of trading.
If you can consistently trade for two years, you will appreciate that trading has its ups and downs. When you first start out, there are going to be a lot more of those down moments.
Save Time and Effort
You will save a lot of time and effort by demo trading the right way.
Your time is incredibly valuable and many traders cannot commit a full day’s work to trading. Wasting time by having to return to demo trading because you rushed onto a live account will only extend your learning process.
Be smart and efficient – dedicate enough time to your demo trading. It serves as a method of preparation. Ignore any broker pushing you to open a live account. Of course they want you to, it’s how they make money!
You will only be increasing your effort if you don’t demo trade enough. Mental stress over losses, doubts creeping in over your performance – these are both things that will increase the difficulty of trading, particularly for new traders.
Risk and Psychological Factors
There is also a big factor of psychology and risk to take into account.
If you jump in to live trading and experience heavy losses, you are most likely going to quit. Psychologically, you are most likely going to be feeling down and your logical reasoning rightly tells you to step away.
The direct and indirect risks you take on by not demo trading will often result in would-be traders cutting their career’s short.
Now, this is a common mistake that many new traders make. If you have jumped into live trading quickly and feel that you are not yet ready – that’s fine!
You can always go back to demo trading and return to a live account further down the line! Don’t fall into the trap of immediate gratification with trading. You can wait a year before you open a live account and go for those profits. Your mental fortitude is going to play a big part in your success as a Forex trader.
Why start earlier, to lose more money, and then risk ending your trading future over one year of bad results. It can take traders years to become profitable and not every successful trader is profitable every year.
Take your time. Understand your own psychology. Become familiar with how to trade and fit it into your schedule.
If you do all these things on a demo account, I guarantee that, in the long run, you will be much better off and much better equipped to become a successful Forex trader.