Differences Between Forex Demo and Live Trading

Forex is generally divided into two server groups, DEMO and LIVE. LIVE is a real trading operation, while DEMO is a simulated trading. There are often traders who do very well during simulations, but then lose money when they wait for real trading operations. So why does this happen?

Forex simulation trading:

Forex simulation trading refers to using the simulation account of Forex trading software to conduct risk-free Forex transactions. Since all transactions are done with simulated coins, there is no loss or profit for traders whether they win or lose.

The difference between Forex simulation and real trading:

So what are the differences between Forex simulation and real trading? We answer this question from two perspectives, one is from the perspective of the platform, and the other is from the perspective of specific transactions.

Platform angle

1. Servers are different

The servers of general platforms are divided into: DEMO (simulation server) REAL (real disk server) MT4 platform simulation server DEMO, real disk server LIVE.

2. Different spreads

The spread between simulated trading and real trading on some platforms is different. Depending on the specific platform, the spread between most simulated trading and real trading is the same. (Generally, there is no commission added for simulated trading)

3. Different data transmission speeds

Data transmission, generally the data transmission of the simulation platform will be relatively slower, but the difference is not big. Depends on the specific platform.

4. The biggest difference is: the funds in the demo account are fake.

Specific transaction angle

1. Mentality

We often hear a saying that the essence of trading is to trade human nature, so EA is very popular. From this point of view, because the simulated trading is not the trader's own funds, but the virtual currency, it is very bold and will not feel bad even if he loses. In the real trading, traders are relatively cautious and dare not place bets easily. Once they lose, they will feel annoyed and regretful, which will affect their investment behavior.

2. Impact on the market

In the simulated market, if you place an order for trading, it will not be displayed in the buying and selling stall, because your funds are virtual and do not participate in the market game, so your funds will not have any impact on the market. On the contrary, if you place an order in a real market, your real funds participate in the market game, and the original trend may be reversed due to the change of the opponent's order or the long-short situation. (This is only theoretical)

Advantages and Disadvantages of Simulation Disk

Advantages:

1. For novices who do not understand the Forex trading platform, using a Forex simulation account can help novices in Forex investment quickly understand Forex transactions, become familiar with the process of Forex transactions, and find a platform that suits them.

2. For traders who have been trading for a period of time, they can experience the market conditions of many days in one day, and can verify their strategies and technical analysis in a simulated account. Of course, this is also a preliminary verification. Due to mentality reasons, it is still necessary to conduct actual operation verification.

Disadvantages:

1. Neglecting fund management and being blindly arrogant

Forex demo accounts usually have a principal of 100, 000 to 200, 000 US dollars. Faced with such a large amount of fake currency, novice traders tend to neglect fund management. Excessively high initial trading funds play a role in instigating and encouraging investors to take risks to a large extent (after all, it is not their own hard-earned money). But the reality is that many investors open real accounts with micro or mini accounts of a few hundred dollars. Once it becomes a habit to place large orders and heavy positions, it is difficult to correct it.

2. Easy to deviate from the trading plan

Once a trader has established a trading plan, they usually test it on a demo account. However, traders do not always stick to the plan. When they discover a trend in the market, they will immediately react accordingly instead of executing according to the trading plan. In a demo account, they receive no real rewards or penalties regardless of whether they adhere to the trading plan.

How to conduct demo account trading?

Back to this topic again. In fact, the editor finds it quite difficult every time we talk about it. Everyone has their own trading methods. Let me share some of my opinions.

1. Choose a demo account with a suitable amount

The biggest difference between real trading and simulated trading lies in funds. Although US$100, 000 is just for fun for some rich people, most investors' deposits when they start trading are between a few hundred and several thousand US dollars. But for ordinary traders, the amount should be consistent with the planned deposit amount when preparing to open a real account in the future, so as to have a more realistic trading environment.

2. Develop correct trading habits

When conducting simulated trading, since it is not real money, there are often some bad trading habits developed during simulated trading, such as:

Avoid heavy position trading (this does not mean that heavy positions are not allowed, but for most novices, heavy positions often mean liquidation),

Avoid periods when exchange rates change more frequently (for novices, due to lack of experience, the market fluctuations encountered are like non-agricultural markets, and it is easy to be impulsive and cause losses, and such market conditions are not suitable for investors to summarize the fluctuation trends of the Forex market.)

Strict self-discipline. If you have a trading plan, strictly implement it according to the plan. When conducting Forex transactions, strict self-discipline is extremely necessary for most people. It is not ruled out that some people will make amazing moves. However, for ordinary traders, considering long-term trading, strict self-discipline is extremely necessary.

3. Summarize your own transactions

Simulated trading is the best place to learn about Forex trading and become familiar with trading. You can summarize some trading skills in simulated trading (but these skills may only apply to simulated trading) and find profit-making operations that suit you. This is the model for you to build your own trading system later.