So, you have learned everything there is to know about Forex from pips, spreads, margins, leverage, brokers, and trading costs, and all that‘s left to do is log in, select those charts, and start trading. Right？ Hang on! Despite doing well on a demo account — great in fact — once you get into live Forex trading, losses can mount very quickly. This is the reality most new traders face. How？ Let’s find out!

Forex trading has now become a viable earning option for everyone, no matter where they live or from which part of the world they come from. Anyone over the age of 18 is legally allowed to trade on the Forex market, as long as you have an internet connection. However, even though the commercials have glamorized and popularized Forex traders as wealthy individuals driving fancy cars, they make up only about 5% of the market, and most of them lose money.

There are countless studies that show that most Forex traders lose money despite the fact that no one talks about it. The UKs Financial Conduct Authority has reported that 78% of active retail Forex and CFD accounts were loss-making, with a total loss estimated at £1.07 billion on average. The reason for this is that many beginners fail to prepare themselves for the live Forex trading environment and fail to utilize demo trading to its full potential.

Newbies often judge themselves incorrectly and rush into live forex trading with real money at the very start. However, trading Forex can be a lot of work all at once since it undergoes various changes and advancements, time and again. Opening a demo account can be your best bet for learning the ropes as you begin. Upon mastering the basics and honing your skills, you can dive into live trading more confidently for your pot of gold.

Demo first! You have no choice!

Yes! If you want to make things right, the first thing you need to do is open a demo account and use virtual money before you risk your real investments. This article explains what a demo account is, how to start a free demo trading account and when to make a switch from a demo to a live Forex trading account in detail.

What is a Forex Demo Account？

The forex demo account is a free trading account backed by virtual money that traders can use to learn how to trade, test their trading strategies, and learn how the brokerage platform works. It is highly beneficial for forex beginners as it enables them to begin free online trading quickly, allowing them to practice trading before investing real money.

Forex demo accounts can effectively be used as a free trading simulator and can be extremely helpful if you are just getting started trading Forex, as demo trading mimics the experience of live Forex trading. By using demo accounts, users can learn how to analyze price movements, practice forex risk management strategies, understand spreads, leverage tools, and apply stop-loss and take-profit orders in the real world.

What are the Benefits of using a Forex Demo Account？

Starting out on live Forex trading markets using your own hard-earned funds entails a lot of responsibility and dedication. Its crucial that you should not rush into something that you are not prepared for. Live Forex trading accounts will certainly excite the thrill-seekers. But eventually, they can lose money by the biggest margin as they plunge into the pool without understanding its depth.

If you ask any experienced trader in Forex, they will surely list the endless benefits of demo trading accounts, especially for those who are just starting out. The following are a few important benefits that may interest you:

• Having a Forex demo account is like having free Forex training. This is due to the fact that demo accounts allow traders to practice their skills without putting any real money at risk, as they are trading with virtual funds instead.

• It is common for emotions to play a big role when it comes to Forex trading. A few winning trades can trigger euphoria and overconfidence and losing a few trades can lead to frustration and doubt. Demo accounts allow you to identify and manage these emotions effectively.

• Demo accounts are by far the best way to test any new indicators or strategies youve learned. Eventually, you may also develop your own trading system after some time has passed. Risk-free trading allows you to be more creative in terms of testing and identifying what works best for you.

• You may find it challenging when you first start out to find the Forex trading sessions that work best for you. Using a demo account can help you find the best routine before you start risking real money.

• Demo accounts are ideal for vetting a brokers legitimacy, trading platform, and trading tools. Furthermore, it allows you to avoid choosing a scam broker, thereby avoiding forex scams.

Furthermore, there is a common misconception that demo accounts are only suitable for Forex beginners. Though the truth is, Forex demo accounts are useful even for those who have extensive experience trading Forex. Demo accounts can be excellent tools for experimenting with new forex brokers, platforms, and strategies since they allow experimentation and exploration at no cost.

Forex Demo vs Live Trading Account

A Forex demo account allows you to practice and test different Forex trading strategies with virtual money without risking your own money and helps you find the reliability of the Forex broker with ease. However, demo accounts lack the emotional commitment of real trading, making them less useful than real trading accounts.

The following are some potential differences observed between live Forex trading and demo account trading:

• Demo trading may create an unrealistically positive trading environment that cannot be found in live trading when a traders account funds are at stake.

• Demo trading does not have any real consequences for traders who fail to follow their trading plan. Therefore, traders might develop bad discipline-related habits that cost them money when they trade live.

• When trading in a demo account, traders might be tempted to overtrade or underestimate risk. When they switch to live Forex trading, this behavior can have serious negative consequences.

Overall, demo accounts can offer novice traders the opportunity to learn forex trading without any risk. Trading them for long periods of time leads nowhere in terms of profits. Trading in a live account is the only way to make substantial profits.

How Long Should You Demo Trade Forex？

Answers to this question vary from person to person. According to experts say, it usually takes approximately one or two months for beginners to become proficient with trading platforms before they begin to trade actively. However, you can take as much time as you need until you feel ready.

The problem is, in most cases, traders spend too much or too little time on demo accounts because they are unsure when to switch to a live account. While practicing in a free demo account is great, it wont bring you any real-life profits. In order to turn your practice and knowledge into actual profits, you must open a live Forex trading account.

As you work your way through the learning process, the day will come when you are ready to move forward with live Forex trading. However, you will be the one to decide when that day arrives. The decision of when to move on from a demo to live Forex trading can be challenging if youre a novice trader. Make sure you go through this checklist carefully before investing your life savings in the volatile Forex market.

7 Signs you are ready to move from Demo to Live Trade

So, you‘ve successfully applied your strategies on the demo account and think you’re ready for Forex live trading？ Thats great! But how can you be sure you are ready to switch to live Forex trading？ Well, the following is the checklist that will help you decide if you are ready to trade live.

1. You feel comfortable with the Broker & their Trading Platform.

It is imperative that you become familiar with your trading platform very well before you open a live Forex account and invest your hard-earned funds in your trades. Isn‘t it frustrating to realize that you have no idea how to exit a trade at the exact moment you’re about to do it？

That‘s why most expert Forex traders use demo accounts to assess and value a broker’s reliability before depositing their finances with them. You should also open a demo account with the same broker you intend to use for live trading.

It‘s crucial that you should also understand slippage and the broker’s usual pip spreads (trading costs) before setting orders so that you can account for them. You should be familiar with the analysis tools and be aware of the deposit and withdrawal options as well.

If you need help making a choice, you can check out the 10 things you should know before you open a Forex account to help you make a smart decision.

2. Your demo account has been consistently profitable.

It is not a good idea to transition to live Forex trading if you aren‘t making consistent ’wins on your demo account. You could demo trade until you are profitable on 70% of your trades. Maybe just 60%.

You shouldn‘t treat trading as a get-rich-quick plan, instead, focus on profit over the long term. Don’t be too hard on yourself if youre not getting consistent profits while trading on a demo account. Instead, develop strategies that will help you minimize your losses and maximize your profits by identifying high-probability setups with reasonable reward-to-risk ratios.

It is also a good idea to monitor the profitability of your demo account regularly. By doing this, you‘ll know whether you’re on the right track and can see what needs to be improved. Learn how to measure your trading performance to help you evaluate how good or successful you are as a trader.

3. You have a well-set Trading Plan.

Remember that when it comes to live Forex trading account, you are dealing with real money and real trades. Hence, before you make the switch, be careful not to mess up your trading strategy. You should have developed some sort of trading plan for your demo account. The strategy you use in live trades will change and adapt as you get more comfortable. And you should know how to tweak it until it starts working consistently.

With a demo account, you can experiment with different strategies and adjust them until they work. You should only move to live Forex trading once you have a strategy you feel comfortable with, and a good understanding of the analysis tools and indicators. If you don‘t have a set trading account yet or if it needs some improvement, here’s how to develop a successful Forex trading plan to maximize your profits.

4. You have clear-cut risk management strategies.

It has been said that 50% of your success in Forex trading depends on developing profitable strategies. The other 50% relies on an effective risk management strategy. On that note, having a well-thought-out set of risk management rules is also a must when switching from a demo to a live Forex trading account.

Do not forget that the Forex market is prone to volatility, and there are times the market can go crazy, leaving you doubting your analysis and trading abilities. If you are faced with these difficult times, your risk management plan may be all that can protect you.

A successful Forex risk management strategy also begins with developing a well-thought-out entry and exit strategy. This way, you know you are always in control of your capital and hopefully, you will also avoid suffering larger losses in the long run.

5. You don‘t lose your cool during a losing trade.

Yes, if you’re able to make smart decisions in your demo account without getting carried away by emotions, it‘s time for you to start trading with a live Forex trading account. However, keep in mind that live Forex trading demands a higher level of emotional control than trading on a demo account. Because you’re trading with real money, and the figures change all the time.

A loss can be led to impulse decisions that have nothing to do with your strategy. Despite feeling as if everything is going wrong, it is crucial to remain calm. As a beginner, it can be a bit overwhelming, which can make it very tempting to react. However, developing sound trading psychology contributes significantly to the decision-making process of any trader.

6. You have enough capital to get started.

For live Forex trading to be successful, you need to have a reasonable amount of capital at your disposal. However, its important not to risk more than you can afford. Using a demo account will help you gain a better understanding of how much you can invest in a trade and how to use Forex leverage to your advantage.

You dont have to invest a large sum really to start with live Forex trading as it varies from broker to broker. You can start investing with AximTrade accounts with as little as $1 and start your investment journey instantly. Based on your trading strategy, experience, and investment capital, you can choose from a variety of account types.

However, a small investment capital means smaller lot sizes, fewer opportunities, and lower profitability. Small gains can frustrate traders and make them give up. The transition from demo to real trading can be easier if you begin to trade Forex with $100. While it may seem that $100 doesnt buy much these days, it can get you started in Forex trading and even provide you with additional income.

7. Your trading style is clear to you.

Since trading with a demo account allows you to try all kinds of trading styles, before moving to a live Forex trading, it is easier for you to decide what kind of trader you would like to be. Following are the four most common types of the trading strategy adopted by traders:

• Day trading — The process of buying and selling currencies within one trading day. If you are among the thousands of traders looking to grab the bull by the horns and earn a living, Forex day trading could be an ideal career path for you.

• Scalping — Scalping is the most popular short-term forex trading strategy that involves entering and exiting positions within a few seconds or minutes.

• Swing trading — A swing trading strategy is perhaps the best Forex trading strategy for beginners. Forex traders use swing trading to profit from price swings using a medium-term trading style.

• Position trading — It is a type of trading that lets traders keep their trades open for a long time. The objective of positional trading is to sustain a position for one or more days, weeks, or months, depending on your objectives.

You can learn all these profitable Forex trading strategies for free by taking the Forex course from AximTrade.

Original Article: When You Can Move from Demo to Live Forex Trading Account

Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers personal circumstances, investment experience, or current financial situation.