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What is the difference between trading a demo account and live forex trading? Forex demo and live trading account If you are new to the world of forex trading, then an obvious question that would come to your mind is what is the difference between forex demo account trading and forex live account trading?
Often traders deposit the trading money with a broker in the options from 100 of earning higher profits. However, soon they realize that depositing money with a broker is not the best of the options.
This makes it quite hard to observe emotions that are usually present when trading on real accounts. Traders often feel fear and greed on real accountswhich are emotions that are not triggered on demo accounts. Overtrading is also something that demo traders often do.
This is precisely why they opt for demo account forex trading. Once familiar with the demo account trading, traders take demo account and real account next step forward in the form of forex live account trading. Forex live trading, as the name suggests is all about trading in the real forex market or environment. In this article, we will help you to understand the differences between the forex demo account and live trading.
Forex Demo and Live Account Trading -The Differences Traders, especially those are planning to enter the forex market, turn to demo account trading to get a feel of the market and the real world trading environment. In simple terms, a demo trading account allows traders to trade fake money by mimicking live forex prices.
A demo account helps traders to practice trading beforehand and determine the potential risks of trading since they get to trade in a risk-free environment. On the other hand, a forex live account trading is meant for traders who are experienced enough to calculate their risks and place accurate or profitable trades.
During live account trading, forex traders may also experience that their orders are not getting filled at the right time. This is because they get to trade in a completely different trading environment.
Differences in Execution
Apart from order execution, there are many other differences between a forex demo account as well as live forex accounts trading. For instance, a trader never gets re-quoted in the forex demo trading as they trade in a controlled environment. In the case of live forex trading, traders get a lot of re-quotes and need to adjust with them as and when they are provided.
Also, spreads are tighter for traders when they engage in demo trading whereas in live forex trading the spreads can be different by around 1 pip. This is much more evident when a trader trades with a broker that offer variable spreads, wherein the conditions of the market as well as the providers of liquidity rule the spreads.
What’s a Demo Account?
In demo trading, stop-loss orders are always perfectly executed. But, in live forex accounts, trading traders always find that their orders have been executed at high levels by the broker, thereby putting them at a slightly higher risk as compared to what they had expected.
It must be noted that one of the major reasons behind the differences that arise between live forex and demo trading environments can be attributed to the data feed. Brokers are required to pay a specific amount of fee to gain access to the live forex market quotes. In addition to this, there are extra overheads like the fee that needs to be paid to the liquidity provider, which eventually makes it slightly expensive.
Trading with a Demo account vs Real Account
On the flip side, a forex demo account can be created for free, which is why brokers do not provide live feeds to demo traders, which makes the demo account and real account forex trading environment completely different. So, what really is the purpose of a Demo Forex Trading Account? As already stated above, a demo trading account is meant for traders who are new to the forex market and want to get a feel of how things work in real or live forex environment.
It basically helps traders to test their strategies and determine whether they actually work or not. Hence, the main purpose of creating a forex demo account is to understand how the platform works.
Traders, especially those who have new entrants in the world of forex trading must use their demo accounts to test every single button or feature that the platform offers. This will help them to transition to live forex trading quickly and efficiently.
Forex Demo Account vs. Real Account: What All Traders Should Know
Apart from this, they must also have an understanding of the different types of orders and the manner in which they must be executed. With a demo trading account, traders can easily choose as well as execute their orders without the fear of losing their capital amount.
Traders must understand the basic difference between a pending order as well as the market. They should also know how a stop loss order works as opposed to limit orders as well as how they can place SL stop loss and TP take profits orders for their trades. In addition to this, they must also realize what would happen if the price reaches those limits or orders. By experimenting with different features and possibilities and determining how things work in the forex world, traders can gain the experience required for trading in the live forex market.
In essence, demo trading is available for a period of three months or so.
During this time, traders need to pay close heed to the market dynamics, as well as the manner in which the price moves up or down. When traders gain an understanding of how prices differ demo account and real account different forex markets as well as with different forex pairs and time frames, they are able to trade better. Conclusion To sum up, both forex demo account trading and forex live account trading are different from each other.
Demo trading helps you to understand what real or live forex trading can be like. Once traders have gained some demo and live trading experience, they need to exercise control over their emotions and know when to enter or exit the market to be able to trade profitably. It is equally important to understand Forex signals and how do Forex indicators work. Learn to handle the pressure that lives forex trading brings along with it.
Traders should neither cut their profits early nor become too greedy and not close their profitable trades on time. Post navigation.