28: How Long Should You Trade In A Demo Account?
Highlights and Takeaways:
- Is it better to trade in a demo account for 3-6 months, or move onto a live account as quickly as possible?
- Trading with real money gives you a psychological connecting to your trading you don't have in demo trading.
- Demo trading is great for learning how the platform works.
Now here is another question I get thrown at a great deal as well. How long should I continue to trade a demo account for?
That is a great question. But before I answer it let me first explain what a demo account is just in case you don’t know what it is.
What is a Demo Account?
So a demo account is where you sign up with a broker and you can trade on their platform using pretend money. Sometimes this is called paper money.
Everything is just like how it would be if you were trading live money. So most of the time you will get live real time data showing the exact price the currency is at right at that moment. And you can place trades and stops and do everything just like you would really do. The only difference is that you are using this fake money.
Points of view
Now I want to be completely honest, and transparent here, I have some conflicting thoughts on the subject. I can see everyones viewpoint on the subject but have yet concluded my own view point on it.
On one hand I see the validity of staying in a demo account for 3-6 months until you get your strategy together and trade it for a long time that you become consistently profitable with it.
That logically seems like it is a great idea. I mean, you don’t need to loose any of your own money and can still learn to trade.
You can take your time learning and playing with different trading strategies and systems and never loose a dime.
That makes sense right?
Well it does, but the biggest problem with that is that you will not have any psychological connection to any of it. And this is the other side of demo trading. You need to have a mental connection to the money you are using. If you have a demo account and place a large, over-leveraged trade on, and then loose all the money in the demo account, you would just be like “well, ok, let me reset the account and start a new one and go again“. It would be like respawning in a video game. You get multiple lives.
But in reality it is not like that. If you ended up loosing all of your money, you would be a complete mental wreck. And you would not just want to go and reopen an account and refund it with more money. More than likely, you would quit and say something like “well this trading thing doesn’t work. The people that make money somehow have something I don’t” or something like that.
You need a mental connection to the money you are trading.
Trade with live money
So then you will have other people on the other end of the spectrum say that demo trading is a complete waist of time for this lack of a psychological connection. And I agree with this as well.
I think that demo trading is great for learning how the trading platform works. Getting to know the ins and outs of how to place orders, stops and targets on the platform, learning how to use the indicators, and all that stuff. That is what a demo trading account is great for.
You don’t want to learn how to do all that stuff while trading a live account. One tiny mistake in order placement and all your money could go right out the window.
I also think that demo trading is good for when you are trying out new strategies as well. So if you have been trading for a while and you have this idea on how you can make your training system better, you can go into a demo account and test the validity of that theory to see if it would have worked or not.
Again, you don’t want to do this in a live account.
So if you are a beginner, the first thing you would need to do is learn about trading. Learn about all the basics. Then find a system of trading that meets your style and beliefs on trading. Find a good mentor. And then use a demo system for learning the basics of how to execute trades and how to trade your particular system.
But once you do that, you need to move off of a demo account and into a live trading account. And do this quite quickly as well. You will loose some money. I guarantee it. Everyone looses money. But you need to be ok with loosing money from time to time. It is going to happen. And it happens to even the best of us.
You will progress so much faster if you get to a live trading account instead of waisting time in a demo account for months and months. Some people even spend years in demo accounts waisting precious time that they could have been making money in trading all because they are afraid. Don’t be afraid.Get out there and make money.
So there you can see that there are multiple points of view on demo trading. And I think I steer more toward the second idea of trading a live account and only using a demo account for learning the platform and readjusting my trading system vs demo trading for long periods of time.
And I say this after me having traded a demo account for months before I ever went live. But looking back at that experience, I wish I would have moved to a live account much sooner. I would have learned much faster than I did.
So what are you going to choose? Are you going to trade a demo account for a long time until you get extremely profitable and then move to a live account? Or are you going to move to a live account as quickly as possible? OR are you one of those individuals that will trade a demo account forever and never move to a live account?
Whatever the case is, email me and let me know. And let me know any struggles you have right now in your trading. Remember I am here to help you. I can’t help you unless you let me know what you are having issues with. So email me. You can email me at firstname.lastname@example.org.
Links and Resources Mentioned in this Episode:
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