The Difference Between Demo & Real Account in Forex
You have probably just entered the forex market and want to know the difference between a real account and a demo account in forex and get to know the features, differences, and similarities between a real account and a demo account. So stay with us in this article from the Trendo website, where we mention the difference between real and demo accounts in forex. First of all, you should know that a trader in the forex market is successful if he has acquired the necessary basic training and skills before starting work, otherwise, he will suffer so many losses in the forex market that he will lose the motivation to continue and stay in the market. Therefore, brokers have provided a feature specific for beginners so that by using the tool they can test their ability to predict trades, in other words, increase their skill and experience in analyzing and predicting price charts by trial and error. This tool is called "Demo accounts." The important question is, what is the difference between a demo and a real account? Further, while mentioning the differences between the real and the demo account, we have also discussed the advantages and disadvantages of using the demo account.
Contents
What is a Demo account in the forex market & how is it different from a Real account?
The requirement and condition to accessing the forex market trading are to register with one of the reliable and trusted brokers active in the forex market. When registering and opening an account in the broker, you can open a real and a trial account or demo account. The main difference between a real and a demo account is that with real accounts you will trade with real money, while demo accounts use virtual money with no real value to trade. The market conditions for demo accounts are the same as real accounts and there are no differences except for real and virtual funds.
In the demo account, the investor's real money and capital will not be involved in trading, and there will not be any losses. But in the real account, capital and losses are also Real. In addition, using a demo account for a certain period is very helpful in acquiring the necessary trading skills. So, considering the mentioned points, you can understand the importance of a demo account and using this type of account.
It is worth noting that the probability of beginners losing in the first trades is very high, even though they have spent a lot of time training, this is why, if they directly enter their capital into the market and engage in Real trades, they will lose their capital. Therefore, we recommend that newbies use demo accounts for a while and gain the necessary skills, then enter into trading by capital management and determining profit and loss limits in buying and selling positions.
Durability and survival in the market are one of the main principles of financial markets. We have repeatedly heard from Forex market operators that survival and durability imply success. Therefore, to be sustainable in the market and to achieve success, it is necessary to follow the correct path. That is, get the required training first, then do trial and error using a demo account for a certain period, and after you have acquired the necessary skills, enter into Real trading.
What Are The Benefits Of Using A Demo Account?
The most important advantages of using a demo account are as follows:
- The main advantage of using a demo account is that your capital is not involved in trading, and you can predict and analyze the market and your transactions without incurring losses.
- A demo account allows you to access and review charts.
- You can see all the developments in the forex market without logging into your real account.
- With a demo account, you can try different trading strategies and learn their correctness.
- The amount of initial capital to enter the real market is also determined.
- In the demo account, all the features of the Real market are at your disposal.
- The trading risk is zero.
- Testing capital management is also one of the advantages, and you must know that you should only involve 1-2% of your capital in each transaction.
But using a demo account has some disadvantages, which we have mentioned below.
Disadvantages Of Using A Demo Account
In demo accounts, the trader does not take any risk and cannot get to know the Real market in detail. In other words, trading appears easy and the trader is deceived by the simplicity of Forex trading. However, the fact is that Real trading in currency pairs involves high risks.
Another disadvantage of using a demo account is market psychology becomes meaningless. The psychology of traders in the market and one's psychology are some of the most important issues in the forex market. Every trader should be able to master emotions such as fear, greed, anxiety, and stress. That is because, in most circumstances, emotions such as fear and greed cause traders to incur losses. In the forex market, you need to act decisively and control your emotions so you can think and make decisions correctly at critical moments. On the demo account, these emotions do not occur, and the trader can open a buy or sell position with ease.
The Difference In The Brokers' Performance Speed In Real & Demo Accounts
As mentioned above, all Forex market's Real activities are simulated in the demo accounts, but from experience, in some brokers, some details differ in the execution of the trades and are not performed in the same way. For example, the stop loss application, exit from the transaction, etc., is done faster in the demo account than in the real account.
In Trendo, there is no difference between the trading speed and the account's performance in a demo and real accounts. In Trendo, you can do transactions with zero spread and the highest speed whenever without worry.
Read more: What Is A Broker?
How Long Should We Use The Demo Account?
As mentioned earlier, the demo account is for familiarizing yourself with the environment and tools available in the market, as well as gaining trading experience, so the use of the demo account should not be too long, because the long-term use of the demo account will put you in a situation where in the future, you will not be able to trade and operate correctly in your real account. In other words, it exposes the trader to false habits. Therefore, we recommend leaving the demo account after a short period and opening your real account. Then experience Real market trading with capital management and low trading volume.
Summary
As learned in this article, the first step to entering the forex market is to open real and demo accounts with brokers. We mentioned that the forex demo account is a demonstration and trial version of the real account, which is offered by many forex brokers to customers and beginners and novice traders, so by using this type of account, they can benefit from virtual money and a risk-free space to familiarize themselves with the trading platform and forex market and test their different trading strategies. That is the main difference between a live trading account (Real) and a trial or demo account.
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