Why trading with a Demo Account is Not The Same Our Thoughts.

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Trading on a demo account is dangerous

A demo account is a great simulator for beginners. However, trading on it may be the biggest mistake that will reduce all efforts to zero.

Trading on Demo Account is the biggest mistake that novice traders can make. This is the most counter-productive way to learn how to trade properly. At trading on a demo account, each individual trading decision is based on zero emotions. You are actually training how to enter and exit without taking any risk. The fact is that the greater the risk, the greater the reward. Because the trading on a demo account has zero risk, then it has no reward. This actually increases your risk for rewards when you start trading for real money, because you have learned to make decisions that are not applicable in the real world. When you start making these decisions in real trading, it will lead to a financial collapse.

To trade properly traders should have 100% technical skills, but they should apply only 15% of these skills when trading. Another 85% is to keep your emotions in check. Profitable trading is 15% technical and 85% emotional. So how do you keep your emotions in check?

To do this, you must determine how much money you can risk during the training, which will make trading a productive and educational experience. We do not suggest that you risk all your capital in every transaction to make sure that you are “emotionally trading in the markets”. We all have a different financial situation, and each person will have a certain zone where a certain amount of money at risk will cause a certain level of emotions. Do you think that a person with a risk capital of more than $ 2 million will experience any emotions, risking $ 100? If this person buys 100 shares for $ 20 and the share drops to $ 19, he is unlikely to experience any emotions. I am sure that if he had 10.000 shares in this situation, he would have experienced far greater emotions, perhaps much greater emotions.

No one can determine emotional level another man. What each of us must take to make trading an educational experience is to find our “emotional level of risk”. I have a friend just starting to trade with a $ 25.000 trading account. He found that a loss of $ 100 creates an emotional environment for him, and a range of $ 70 to $ 130 is his emotional level of risk. When this trader risks $ 50, then this is an insufficient level of emotions. When he risks $ 500, it is associated with too much risk, and his emotions are too strong for him to think clearly and make appropriate decisions. After this trader received a month of trading experience, his emotional risk level increased, so he began to feel comfortable, but still emotionally at a risk of $ 400.

The secret to educational and profitable trading It is to closely monitor your emotional level of risk and change their actions as necessary. It may also mean a reduction in your risk capital. My friend, who was comfortable with $ 400, had to lower this level to $ 300 after he and his wife found out that she was pregnant and decided that they should buy a house because their rented apartment was too small. This imposed great financial responsibility, and paying for their house lowered his risk capital. Numerous factors can affect the emotional level of risk, and only you can judge where this level should be. No one knows your situation better than you. For those who are not familiar with direct trading, trading on a demo account can only be useful when you study trading platform. It is not very wise to start trading with real capital when trying to learn software. If you do not know how to set up charts, a list of instruments, an entry order, etc., then trading on a demo account recommended if you follow a specific set of rules. Most demo accounts allow you to trade with different account sizes. They also provide you with fictitious order execution. Therefore, in order to study trading properly using a demo account, you must follow these principles:

1. If you intend to open a trading account, for example, at $ 10.000, make sure that the size demo account is $ 10.000, not the standard $ 100.000. The reason for this is to be sure that you will not get used to risk with more money than you have. If a novice trader is used to risking $ 100.000 with demo trading, then he is likely to take too much risk when he begins to trade in real capital.

2. You should trade in the sizes of positions that correspond to your emotional level of risk. You must not get used to trading 100 lotswhen, in reality, you will only trade 10 lots or trade no matter how much corresponds to your emotional level of risk.

3. Ignore the unrealistic execution of orders, which shows a more favorable price in each transaction. Trading simulators will often execute your order at a price that would never have happened in real trading. If you want to buy a stock that is currently trading at $ 20, place your order at about $ 20.05 and when you want to close the position, do the same. This helps the trader to get used to the execution of orders in real trading. You should not get used to virtual profits that never happen in real life.

4. Create real emotions during virtual trading. Find someone you could compete with in trading on a demo account. For each point you win, another player must pay you, for example, $ 5 and vice versa. (Make sure you keep the limit of $ 100 during your friendly competition). This will help bring emotions to trading decisions.

As soon as you feel comfortable with the software of the trading platform, stop virtual trading and start trading on a live account, but make sure that you stay within the boundaries of your emotional risk level during your first week. You will become a successful trader more quickly by trading for real money than if you will be trading on a demo account. Continuous virtual trading will reduce your chances of successful trading for real money, because after doing something repetitive, it becomes a habit. By trading an unrealistic account size, unrealistic transaction volumes, receiving unrealistic order execution and repeatedly trading unemotionally without real risk, you will gain instincts that are useless and counter-productive. When do you decide to trade for real money after trading on a demo account, you will actually trade below the level of someone who has no experience at all. Before you can advance, you will need to get rid of all your bad habits.

Why trading with a Demo Account is Not The Same? Our Thoughts.

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Best Binary Options Brokers 2020:
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  • Binomo
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    Good Choice For Experienced Traders!

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Member Since May 08, 2020 6 posts VicGuedez Jul 12 2020 at 20:17

Hello, I’m asking an honest question to the community. Let me explain:

I’ve been developing my system for over 6 months now, from the start researched the best way to do testing without investing, and came to understand that ECN demo accounts behave like regular live ECN accounts (also I choosed ICMarkets for ‘safety’). That way if the demo performs as expected so it will in the live account.

Now I keep seeing much of the ‘demo account, demo performance’ comments and it is getting to me tbh. Isn’t that the purpose of the ECN demo account? I understand the claim ‘you don’t trust your system enough to go live, why should we?’, and I’m not asking about that. I’m asking about the sentiment that ECN demo accounts are not representative of what a live account could of have been.

Is there something negative that does not happen on ECN demo accounts? Also I understand that manual trading is not the same on demo than on live, due to trading psychology, but I’m talking about an automated system were you should not intervein unless absolutly necesary.

Member Since Oct 23, 2020 59 posts rickyb Jul 13 2020 at 02:10
Member Since Jan 05, 2020 1189 posts Professional4X Jul 13 2020 at 04:58

VicGuedez posted:
Now I keep seeing much of the ‘demo account, demo performance’ comments and it is getting to me tbh. Isn’t that the purpose of the ECN demo account? I understand the claim ‘you don’t trust your system enough to go live, why should we?’, and I’m not asking about that. I’m asking about the sentiment that ECN demo accounts are not representative of what a live account could of have been.

Demo account price feeds can and often do in fact differ from the live feed from a broker.

Demo accounts have no financial risk with them, so you could just as easily open 10 different demo accounts, trade on each one with completely random and unreasonable trades, and then simply post up the ‘HOLY GRAIL BESTEST EVER SUPER ELITE SYSTEM WITH 9999999999999% ROI EACH MONTH!’ or some other similar.

Demo accounts are simply that, they’re demo accounts, you can’t spend the money from them, they have no financial value, and the results should NEVER be trusted to perform identical in live trading.

If it looks too good to be true, it’s probably a scam! Let the buyer beware. Member Since May 08, 2020 6 posts VicGuedez Jul 14 2020 at 02:43
Member Since May 08, 2020 6 posts VicGuedez Jul 14 2020 at 19:21 (edited Jul 14 2020 at 19:21 )
Member Since Jul 05, 2020 9 posts CrackedMic Jul 15 2020 at 11:27

VicGuedez posted:
@Professional4X I don’t think completely random and unreasonable trades can get you that far. Anyways, thanks for your opinion.

Statistically it is possible. If you open 100 demo accounts and each runs a different ‘random’ strategy then 1 of those accounts will perform really strongly.

Member Since May 08, 2020 6 posts VicGuedez Jul 15 2020 at 14:07
Member Since Jan 05, 2020 1189 posts Professional4X Jul 15 2020 at 21:42

VicGuedez posted:
@Professional4X I don’t think completely random and unreasonable trades can get you that far. Anyways, thanks for your opinion.

Think what you want, but you should think about this for a moment and you will see I am 100% correct.

Open two identical DEMO accounts each with $10,000.00 starting values.

Account #1: BUY EURUSD 1.0 LOTS with a take profit of 100 pips
Account #2: SELL EURUSD 1.0 LOTS with a take profit of 100 pips

Now add a series of additional pending tickets on each of those accounts space 5 pips apart.
Each of those tickets should 0.25 lots, and they should be using the same TP.

ONE of those accounts is going to have a 100% win rate, which you can easily open a stats page to ‘prove you’re a super elite awesome trader with a holy grail and never lose. blah blah blah’

The decision to make those trades is completely random.
It is also UNREASONABLE to think this is a good idea to trade this way.

No strategy, no money management, nothing, just some open trades waiting to hit their TP in one of those directions.

If it looks too good to be true, it’s probably a scam! Let the buyer beware. Member Since Oct 23, 2020 59 posts rickyb Jul 16 2020 at 04:54
Member Since May 08, 2020 6 posts VicGuedez Jul 17 2020 at 00:51

@rickyb Hey ricky, thanks for the opinion.

@Professional4X Yes you are right, for an account of 1-3 months. But that wont last in the longrun which is what I care for. Thanks :)

Why do Forex brokers not accept US clients?

It is a common known fact that the Forex market trading goes on 24 hours a day, 5 days a week. This happens due to the fact that there are multiple centers all over the world where the currencies are traded. Yet, even though the New York session tends to have the most significant impact on currency rate fluctuations, the amount of US based retail traders tends to be quite small.

If you are from the US you can be quite puzzled by the amount of brokers that are offering the services throughout the world, but are still not present in the States. Even though the US is the major market for various goods and services, for some reason FX trading for individual investors is not so common.

US residents can trade Forex

Before we move on any further, it is vital to state that Forex trading in the US is not prohibited. A trader from the US can trade FX online as easily as a person living in Europe or Australia. However, the main difference lays in the variety of brokers a trader can choose from.

There are a few reasons why the amount of FX brokers is very low, let’s examine each of them below.

Licenses and Regulations

When it comes to the brokers that operate in Europe, the regulatory environment is rather simple. Once a broker has obtained a license from one of the European regulators, it can easily accept traders from all EU countries. In other words, a UK Financial Conduct Authority regulated broker can accept traders from Germany, the Netherlands, Bulgaria and other EU member states.

However, when it comes to the US, European licenses simply do not work. A broker that wants to have traders onboard from the US has to be regulated by the NFA, National Futures Association. At this point you may ask, there are brokers that have multiple licenses, like CySEC, FCA, ASIC and more, why would they not get another one to provide services in the US? The reason for this is quite simple – capital requirements. While a broker has to have around $100,000 – $500,000 of locked capital to obtain one of the European licenses, NFA requires quite an enormous amount of capital to be able to operate in the US – 20 million dollars.

This amount of money only corresponds to a deposit that a broker has to make and does not include any legal fees associated with obtaining the licenses, employment of lawyers to be placed on the register and executives. In other words, the US market is an expensive market to operate on.

Even though some brokers make profit enough to afford it, 20 million dollars is quite a large sum to allocate just for a license. On average, the world’s 15th largest broker would hardly earn 10 million USD in profit annually, hence allocating a profit of 2 years for the privilege to work in one country is an extremely serious investment.

The situation with capital requirements was quite different back in 2008 and at that time there were quite a few brokers that accepted US clients. However, today the amount of US friendly brokers is just less than five.

Profitability

Now you may wonder, if there are only a few brokers in the US, why are more brokers not trying to penetrate the market? There are over 300 million people living in the US and it is quite hard to believe that there are no more brokers that could actually afford the NFA licensing. Well, the truth is that, although more brokers could deposit 20 million to operate, not every broker will find it profitable.

As you know, FX brokers earn from the volume traded, hence the higher the trader’s volume is, the more profit a broker makes. However, unlike European countries where a trader has access to the leverage of 500:1, in the US it is only possible to supply 50:1 leverage on majors and 20:1 leverage on minors. This means that a broker can expect to receive some 10 times smaller profit in the US than in Europe, provided that it has the same amount of traders with the same amount of deposits in the two regions.

Furthermore, yet needless to say, wages in the US tend to be quite high, so the whole process of financing the US-based operations is not cheap at all.

Regulator’s attitude

Even though it is already quite hard for some brokers to start operating legally in the US and then to become profitable, historically US authorities have also been seen as a hindrance.

Quite a few brokers have been heavily fined by the NFA for malpractice. While the impact of the reasons behind the fines could be quite insignificant, the fines tend to be heavy: ranging from $200,000 to $2 million.

In other words, a broker may spend a year working hard, and by the end of the year its profits (or even more) can be simply taken by the regulator as a result of certain misconduct.

Indirect competition

US traders have also been much more inclined to stock trading, this is why they often choose to acquire shares over currencies. In most cases, trading stocks is actually more expensive for traders (or more profitable for brokers) than Forex. This is why US based brokers not only have to compete against each other, but also in order to take a slice of the stock brokers’ pie by increasing the awareness about online currency trading.

Conclusion

The limited amount of FX brokers in the US is certainly caused by the heavily regulated environment that requires brokers to deposit a substantial amount of funds and, at the same time, decreases brokers’ profitability by limiting leverage.

This also results in a few unregulated brokers offering their services in the US as they can better meet the needs of the traders, while their legal and operational costs are minimal. However, unregulated brokers that accept US traders should never be your choice.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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