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Forex demo account trap: How to get out of it
By Manferd Hoe
Are you a Forex trading genius when it comes to demo accounts, but a loser when you switch to the Real Thing? If so, then you might have fallen into the demo trap. You might think that after getting good returns on demo accounts, you should be making it big when you start trading Forex for real. However, Murphy’s law always prevails and somehow you don’t make the expected returns in real life. That’s the sign of falling into the demo trap.
Demo accounts are good Yes, demo accounts are good. They allow new traders to hone their skills and get practice. And practice makes perfect. If a strategy doesn’t work for you, just open up a new account and try it again! More importantly, demo accounts are free. And, like a game of monopoly, you can get bankrupt with a demo account but not in real life. If you don’t make it, you can always try it again! Plus, when an account strikes it big, the confidence that you gain is priceless. You’ll feel that you’re ready to make it big in real life. Because demo accounts are good, they are not good for you
However, demo accounts are good only in theory. In practice, most people don’t cross the chasm from fantasy land to real life. The keyword here is “try”. When you’re using a demo account, you’re just trying it out. There’s no risk involved in trying. You don’t feel the pinch when you are trying. It makes no difference if you fail while trying. When you start trading in real life, however, emotions kick in. You are no longer trying and every mistake you make hits you in the face. The strategy you’ve been practicing works, but as you’re bound by your emotions, you make mistakes when you implement them. The reason you fail is because you’re trapped in the comfort zone of the demo account. How do you get out of the trap?
Being in the comfort zone for too long makes you lose the edge. The solution is simple, just get out of it! Practice on demo accounts until you get a reasonable feel that your trading strategy is working, then stop. Now trade with real money, starting small to minimize the pain that you get when you fail. Everyone fails before they succeed, and you have to get used to being a failure before you succeed. Once you’ve crossed the emotional chasm, you can then increase the trading amount to a comfortable level. Doing this will release you from chains of irrationality, and you can then rely on logic to implement your trading strategy correctly. Lastly, everyone makes mistakes now and then. Sometimes, your forex strategy may not work when external forces shape the currency market. When you get out of the demo trap, you can think clearer and act more flexibly. Adapt your fx strategy to the market and you (and your Forex account) will grow through every correct decision you make.
WhizForex is an easy and yet free for everyone to understand guide for teaching beginners how to earn money from the forex market. For more information about forex
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The copyright for this content entitled "Forex demo account trap: How to get out of it" has been specified by the contributor as:
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This intel was contributed by Manferd
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May, 2012
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