Financial Spread Trading - The Dangers of a Demo Account
Anyone starting out financial spread trading is usually advised to begin by 'paper trading'.
This is where you use pretend money to place your trades rather than your hard earned cash.
Just about every financial spread trading company will allow you to open a demo account and to trade with pretend money.
On the whole, this is a great idea as you can place your trades safe in the knowledge that if things go badly wrong you won't lose any 'real' money.
Equally, of course, any successful trades you make only earn you 'pretend' money.
Nevertheless, if you are able to say, increase a 100,000 account to 150,000 in a short space of time it does give you immense confidence.
However, I can tell you from personal experience that this sort of success does not guarantee you success in the real world of financial spread trading.
And the reason for that, in my opinion, can be put down to one over-riding factor and that is 'emotion'.
Risking 100, 200 or more on each trade you place on a demo account is easy.
You place your trade and then let the market get on with it.
You apply your chosen strategy and either make a profit or a loss.
There is absolutely no emotion involved.
Transfer that to the real trading environment and there is absolutely no comparison.
Suddenly emotions come in to play.
You will be trading with real money and as a result will experience all the emotions that go with it.
You will feel fear of losing your money in a losing and greed of wanting more in a winning trade.
So whilst using a demo account is a good idea for testing out your strategies please do not imagine for one moment it will be the same in the real world of financial spread trading.
This is where you use pretend money to place your trades rather than your hard earned cash.
Just about every financial spread trading company will allow you to open a demo account and to trade with pretend money.
On the whole, this is a great idea as you can place your trades safe in the knowledge that if things go badly wrong you won't lose any 'real' money.
Equally, of course, any successful trades you make only earn you 'pretend' money.
Nevertheless, if you are able to say, increase a 100,000 account to 150,000 in a short space of time it does give you immense confidence.
However, I can tell you from personal experience that this sort of success does not guarantee you success in the real world of financial spread trading.
And the reason for that, in my opinion, can be put down to one over-riding factor and that is 'emotion'.
Risking 100, 200 or more on each trade you place on a demo account is easy.
You place your trade and then let the market get on with it.
You apply your chosen strategy and either make a profit or a loss.
There is absolutely no emotion involved.
Transfer that to the real trading environment and there is absolutely no comparison.
Suddenly emotions come in to play.
You will be trading with real money and as a result will experience all the emotions that go with it.
You will feel fear of losing your money in a losing and greed of wanting more in a winning trade.
So whilst using a demo account is a good idea for testing out your strategies please do not imagine for one moment it will be the same in the real world of financial spread trading.