Trading A Demo Account Part 2!

Some traders believe that demo trading is a waste of time and it doesn’t really teach you anything because there are no emotions attached to fake money. I used to think the same but you know what happened? I used to lose a lot of my hard earned money on a live account until I went to practice first.

In this blog, I want to talk about the importance of a demo account. Trading a demo account is not about money. Let’s get that out of the way. The purpose of a demo account is for traders to learn to apply their trading knowledge without committing real money so that their mistakes will not be financially costly. It is to help you trade your strategy so that you can know and have a realistic expectation of how your strategy will perform in a live account.

Furthermore, you will build confidence to trade that strategy and learn how to deal with the drawdowns the strategy comes with. Every strategy has its loses and if you do not trust it well enough, you will be an emotional trader who is always scared to take the next trade thinking that it’s also going to be a loser.

A demo account helps you with consistency when it comes to execution. It helps you to get your facts right when it comes to your strategy and the proper risk management that you need to apply in order to trade successfully in a live environment. Unfortunately, when I was starting out, I did not have this knowledge and I learned the hard way. I therefore urge any beginner traders not to rush to trade a live account before going through the lessons a demo account can offer them.

I hope now, you can see that a demo is not about how much you can make, but it’s about getting your discipline right and your approach to the markets. It’s about getting your numbers right. It is not a waste of time as it can save you lots of your hard earned cash.

What are some of the lessons have you learned about trading a demo account? I’m keen to hear your response!