3 The Danger of Trading Too Old In Demo Account – Every beginner trader must know the name of a demo account. As an account that allows traders to practice using the platform, access prices in real-time, and conduct transactions with virtual funds, demo accounts do have a vital role in the forex trading process.
Nevertheless, the demo account turns out to be a hidden danger for the development of the trader. The reason is simple: Successful traders in a demo account may not be able to repeat the success in the real account, because the demo account does not involve real money. It is practically eliminating the important factors that need to be mastered in trading decisions, namely the psychological pressure when facing the risk of real loss.
Underscored, you will not suffer any material losses while trading on demo accounts, but wallowing in those accounts can prevent you from mastering the skills required to earn a consistent profit in real accounts.
If described further, there are three dangers of trading a demo account that need to be wary of. What are they?
1. Trader So Underestimated Mistakes
This point may seem strange, but it actually makes sense. Demo account is actually a learning tool that works to make it easier for you to practice trading. But when it’s been used for too long, the ease of demo accounts is vulnerable to misuse for ‘underestimating’ trading errors.
As is well known, demo accounts use virtual funds so that when trading loss position, then there is no real loss you receive. When a trading error does not have a meaningful impact, it will be easy for you to underestimate it.
“Ah, it’s just a demo account and I’ll learn this error when I’m trading with real money”. Honestly, have you ever thought of that? If yes, then you have actually abused the demo account function as a means of learning forex.
Precisely because demo accounts do not use real money, you can be more flexible to learn from mistakes. If you are willing to fix trading errors only when it’s struggling with a real account, then what’s the point of the demo account?
2. Not Hone Risk Ability
One of the reasons why many beginner traders find it difficult to profit is the habit of cutting profit and letting loss continue to float. To overcome this, you may already be acquainted with the benefits of Stop Loss and Take Profit, along with the Risk / Reward Risk concept that is part of risk management. In addition, there are also alternative manuals such as doing Averaging, set Trailing Stop, and much more.
However, the advantages of demo accounts that do not carry real risks can easily make you underestimate the importance of risk management. The assumption is like this: “Why bother to estimate the ideal stop loss and take profit or even set the averaging strategy? But if the real loss is also no money is lost”.
Herein lies the danger of trading a demo account if you take it too long. Because it is comfortable with various demo account ease, risk management so not prioritized or even neglected. When it’s time to transition to a real account, the skills in managing risk management are not honed. In fact, it is precisely this aspect that becomes an important key in order to survive in a real account.
3. Creating Bad Habits In Trading
Remember you with the example of “commitment” in the first point? If so, try to estimate how many percents of traders actually apply the intentions in real accounts. In fact, most trading methods in real accounts are a result of what you do in a demo account.
Realized or not, bad habits in the demo account will be carried away in the real account, although previously you always promised in the heart to be more introspective after opening a real account. To change and adjust to real estate account conditions, it takes time and (maybe) some real losses that motivate you to improve habits.
In some cases, bad habits can actually be more serious if it is burdened by psychological pressure from trading risk with real money. For example, when you are used to widening Stop Loss for no reason in a demo account, you will repeat it again when trading in a real account. But because here you are already using real money, then the reason to widen stop loss can be more irrational because it is influenced by psychological factors that can destroy your trading.
How To Avoid Trading Account Demo Dangers
The right solution to anticipate all trading demo trading hazards above is simple: treat a demo account like a real account. But often, this principle is not executed because it has not understood, cannot apply, or even deliberately not done. This is actually understandable because no matter how hard you try to assume a demo account like a real account, commitment and trading psychology in both accounts will not be equal.
Why? The answer comes back to what is at stake, which is virtual money (demo account) and real money (real account). When you already know that trading on a demo account only uses virtual money, then the attitude of anticipation against risk will obviously be looser.
For that, the best way to avoid the dangers of trading a demo account is to use the facility according to its function, which is means of learning to trade. If you already understand how the platform works, how to use the tool and make transactions, and test the system to get the consistency of profit, then immediately transition to a real account. Do not stay long in a demo account just because you still want to trade without risk.
The sire in the comfort zone is safer, but it will not bring significant progress to your trading skills. The important thing is, do not open a real estate account with large capital when first transitioning from a demo account. Use real account types with mild specifications such as micro account. Or better yet if you can take advantage of a cent account that is conceptualized as a demo nuanced real account. Unfortunately, cent account services are not evenly distributed across all forex brokers, and even tend to be rarely provided. To find out what brokers who have served cent accounts, please visit this article.