Profit in Demo Account but Loss in Real Forex Account 🎭

What is a Demo Trading Account?

A Demo Trading Account is a simulated Forex account where I can practice by placing buy and sell orders as needed. Orders execute the same way as in the real market, but the key difference is that there are no actual profits or losses involved.

Is Practicing on a Demo Account Necessary?

Absolutely! If you're new to Forex trading, starting with a demo account is essential. Even experienced traders often use demo accounts to experiment with their strategies, allowing them to evaluate the potential profitability in a real trading environment.

Where Can I Open a Demo Trading Account?

You can open a demo trading account with your favorite Forex broker or directly through MetaTrader software. Most brokers offer demo accounts, and you can fill them with any amount of virtual money.

I recommend using the same amount of virtual money that you plan to invest in real life. This approach helps in accurately calculating your profit potential.

Why Do New Traders Book Profits in Demo Accounts but Make Losses in Real Accounts?

This question boils down to our trading styles, psychology, and adherence to rules and ethics.

Case #1

If I deposit a large sum in my demo account, it becomes challenging to gauge my real wealth creation ability. I recommend keeping the demo account size to a maximum of three times my actual trading account size to develop stronger trading psychology.

Case #2

If I’m not using stop-loss levels in a large demo account, I might be tempted to focus solely on booking profits. However, the currency market fluctuates constantly. If I don’t cultivate the habit of using stop-losses, I risk developing bad habits that could hinder my trading journey.

It’s essential to practice placing stop-loss orders in my demo account. This will prepare my mind for the reality of booking losses in real trading, reducing the chance of falling into revenge trading to recover losses.

Case #3

If I'm not following my trading rules as per my strategy practiced in the demo, I'm likely to incur losses. For example, if I've practiced a 5-minute scalping strategy that sets stop-loss at a specific level, deviating from that in real trading will disrupt my risk-to-reward ratio and lead to losses.

Case #4

Switching brokers can also affect my results. If I've practiced on a demo account with one broker and switch to another with different spreads, I may experience losses due to these differences.

Case #5

Finally, choosing the wrong lot size relative to my account size can lead to negative progress. For instance, if I've practiced with a specific lot size in my demo account and then attempt to trade with a larger size in a real account, I risk larger losses that could be discouraging.

Summary

A demo trading account is a valuable tool for both beginners and experienced traders to practice and refine their trading strategies. By following the same trading ethics and rules in my demo account, I can better prepare for success in my real Forex trading account.