Forex trading has opened up a new world for people who want to make some money. Although there are highs and lows you can experience as a trader, experience, discipline, and money management ability are very important to be successful. When you are a beginner, it is recommended that you use a demo Forex account before you get into the actual business of trading. These accounts are offered by retail forex brokers so that traders can practice the art of trading without running the risk of losing any money.
Demo accounts give you a hang of how live trading happens without any loss of investment. But is should also be noted that new traders who have performed well with demo trading find it difficult in live Forex trading. This is predominantly because the latter involves real money and they are required to make decisions that they would not want to repent for later. Having said that, a comparison of demo and live forex trading throws these key points:
(1) Demo Forex trading is extremely beneficial for beginners who need to understand the trade. They may have no real experience of how transactions happen online and may want to gain a good understanding before dealing with real money. However, this kind of trading has no emotional dependence and hence not taken very seriously by many traders.
(2) On the contrary, if you intend to learn real business and go further, you need to engage in live trading. The decisions that you will make here are crucial and the market movements keep you challenged all the time. There is real money involved and a right decision at the right time earns you a lot of money. A demo trading account can never give you the ability to make the kind of decisions that you would make when you do live trading. Hence, many veterans recommend engaging in live trading and to begin with small amounts.
(3) There is no monetary benefit in demo trading. Any amount of money in demo trading equals zilch in live trading. Demo accounts are sometimes dangerous especially when some trading platforms or Forex brokers modify these accounts to make you believe that you can earn lots of money. It could be the other way round when you do live trading.