Differences between demo and real accounts

Author: Patrick Dresdner
Patrick Dresdner
All publications of the author

Trading on demo accounts and real accounts has some slight differences. In general, every trader, before starting his work on Forex with real money accounts, will go through so called verification stage in order to learn working with a demo account. To select an experienced broker, new market participants should review the information in the section «Forex brokers». Here is described complete information of all brokers in Forex market.

Demo account is also an option of Forex account, but virtual one. Sometimes in professional language of Forex Traders such accounts are called phantoms - phantom accounts. Actually, it is worth noting that Demo accounts are used not only for beginner traders, professionals also pay attention to these programs, especially if there is a need to check or test a new trading strategy on Forex. To choose such a broker, you could entrust your money, it is good idea to use Forex broker comparison on key selection criteria.

Demo account in Forex

The demo trading account is a training program which provides the novice trader the Forex market with the aim of training. To ask for an opening of the trader's account you need to be registered on the site, install on your computer the trading terminal and apply for opening an account. Many banks offer brokerage services, check their offers in the section «Best banks offering Forex trading». Here you can get acquainted with the bank's offer and choose a broker.

Differences between demo account real account

Virtual trading Forex Demo account  works on the principle of a real account, only the funds are not real and despite the right transactions generate income and wrong ones make loss, your real money will be saved. That is, using the trial version of the account, a trader can enter into transactions to conduct operations exactly the same as using a real account. It's worth noting that a demo account and a real account have exactly the same quotes and the same conditions.

The main difference between the two accounts is that Demo account processes trader commands faster, and order is always carried out according to established rates.

Technical differences between real account and demo account

The first difference we have already mentioned this is speed of command processing. Also the fact that working with a demo account the trader does not have any income or loss. Also demo account is fully functional even on weekends and Forex holidays. Since real money is not there, it means, it does not require any adjustment of the actual Forex market. The real accounts work (function) only on weekdays and only professional brokers working with them. How to choose a professional broker you can  find out by reading the article «How to choose a Forex Broker?».

But at the same time when working with a real account, trader still has the possibility to monitor the performance at the weekend, for example, on Saturday, Sunday, and during holidays.

Another difference between these accounts, that crediting in the demo account is instant, because the money is not real. But on a real account crediting system is different. First, the trader receives a notice that it will be credited. He gets the transaction. And only confirmation of the transaction the money will be credited to the trader's account. Section «Best STP Forex Brokers» will offer you to find out more information not only about the brokers, but also on STP accounts.

The third, but also not the least, difference point of demo account and real account in that order on the withdrawals from the demo account is processed automatically, while when withdrawing money from a real account you need to wait for confirmation from the representatives of the broker.

When working with a demo account one should take into account the fact that news of the market for real accounts come at once, but within half an hour on the demonstrative. That makes the work a little bit more difficult.

When working with a demo account you need to take into concideration the psychology of trading, or the market sentiment. The point is that experienced traders who have succeeded in the Forex market is not so much dependable on the broker strategy, but on his mental attitude. It is not seldom case when a trader comes to work and he is not in a good mood. Well, everything the same, you have to feed the family, pay the mortgage and pay credit for the car. And on this background, the loss of even minimal funds in the transaction appears just like a catastrophe of universal scale. How do you think this trader will work? Professionals say it is more likely that this trader will lose a lot, if not all. Why? Because attitude plays a significant role here. And in the world of Forex risk is not always justified. You can risk only with the means that you are ready to put under risk.

The main rules for dealing with the real Forex account

First: Never work with the deposit, which you cannot risk. In other words: it is not worth risking if you can not afford it without catastrophic consequences for yourself or your financial situation.

Second: Do not be impulsive at work!!! Cool and sober view of things. Calm and prudence. Coolness and deliberation. Here are the basics of the Forex market. If you have a problem. If you are upset, for whatever reason and feel that you think inadequate, it is not necessary to work with a currency, it can be very costly to you in the real sense, in terms of financial losses.

Third: Be careful! There are a lot of Forex scams out there that may get you, so use the demo account to confirm if the broker is legitimate

Another very important factor is fear. Imagine a situation: The position is open, the trader is in his best mood, the monitoring and analysis tell him that he is on the verge of a profit, which means that success is near. Trader becomes relaxed, distracted by his private business. After a while, the trader returns to the schedule and sees that the situation has changed, and now the price moves against him and is about to reach the features of Stop Loss. And there's even a majority of experienced traders may make a terrible mistake - they move the stop loss below. This leads to the fact that he now does not give himself a chance to relax. He sits and waits. Waiting for the price going in his direction. And it's not changing. Moreover, it is suitable for the new Stop Loss level. And then the emotional system of decision making comes into action. Trader lowers the stop loss again. He guided somehow by his instinct, and does so with concrete certainty that now the price will go up for sure.

The result of this behavior and calculation become a serious loss of the deposit.

A trader must always remember the main theses of the work:

  • Do not work under the emotions!
  • Do not be afraid of minor losses!
  • Do not be influenced by the feeling of euphoria!
  • Do not panic!
  • Do not make decisions without thinking over!
  • Do not expect miracles!

Experienced traders and brokers, a list of which can be found in «Choosing a Forex Broker» section, generally advise not to give in to unfounded fears or happy feelings of euphoria. The secret of operation is very simple: open a position, put the stop loss and that is all, shut the computer down and do your business. Later you come, assess the result with a cool mind. Also, calmly and prudently open the next operation by putting stop loss, shut it down and do not stare at the chart. It will not work! But emotional exhaustion together with wrong decisions you will have for sure.

 

Here is a side-by-side view that illustrates the similarities of real and demo accounts:

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