Are Forex Demo Accounts Realistic

Many traders find it difficult to make profits when trading on their real money accounts, despite the impressive performance they achieve in practice or on demo trading accounts. It is difficult to compare a real and a demo account, even if the broker offers the same trading platform for both accounts (which is not common in general). Does this mean that brokerage firms are manipulating demo accounts to lure traders into investing in the forex market? Let’s see in the next few lines if the average trader can replicate the demo performance with the real account, which first requires studying the similarities and differences between .

This analysis will help us answer the question that many people have about how realistic Forex demo accounts are.

Differences between demo and real money accounts

The trading platform provided for demo accounts usually includes most of the basic features available on the real account platform. Brokerage companies also allow the client to use the automated trading features and install various types of indicators on the demo account platform without any restrictions. Thus, it can be said that there are no technical differences between the two platforms at the level of basic functionality.

The exchange rates displayed on the demo account platform may not necessarily match the rates displayed on the real account platform. You will also notice that the spread prices in the demo account remain stable even during the release of major news such as CPI or quarterly GDP growth. Real accounts have a large dispersion of spreads during periods of market volatility, which means that the profits you make during the release of this important news will be less than those made on the demo account.

Also, it is common in real trading that the trader often loses the opportunity to enter the market at the desired level due to the price jumps that occur from time to time. In addition, we will notice that currency pairs move randomly or in a zigzag path. These price jumps can often result in hitting stop loss levels that you will not often encounter when trading on a demo account. For all these reasons, real accounts are at risk of early exit and lower profits compared to trading results on the demo account.

Price slippage is also one of the usual phenomena in the forex markets, which is due to the competition between retail brokers for raising liquidity provided by banks and large institutions, which can lead to a rapid change in the prices offered to the trader as a result of the rapid market movement. These instances of re-quotes mean that when buying or selling, the trader may not be able to reach the target price levels. The trader may also encounter cases of partial order execution, for example, 3 contracts out of 10 open contracts in the pending order may be executed, resulting in the remaining part being canceled or the price being updated to reflect recent changes. On a demo account you will not normally experience these disadvantages as you can easily execute any number of contracts at the last quoted price.

Even if a Live Account trader uses Market Execution mode instead of a pending order, there is no guarantee that the price shown on the screen will be executable.

The transaction is executed according to the market conditions and therefore a significant deviation from the requested price can occur.” A trader can experience a positive or negative price slide, which is a problem he will not face when trading with a demo account.

If you practice real trading, you may have to spend part of your time and money just to solve the problems caused by the broker’s mistakes, which is the same broker whose performance will be perfect when using the demo account.

The bottom line is that using the same trading platform with the real and demo accounts does not mean that you will encounter the same liquidity, revaluation, spread and price slide conditions as things are completely different when trading on a real account.

Demo account size

If a trader is a bit of a dreamer, he takes himselfrarely has the time to think about the amount of virtual money available to him on the forex trading demo account. In many cases, brokers will offer anywhere from $50,000 to $100,000 for this type of training account. Therefore, the experimental trader does not feel alarmed when he loses a thousand dollars or two, which may reflect a more serious problem arising from lack of self-discipline and ignoring the rules of risk management. The problem is that this undisciplined behavior can escalate later when you’re trading on a real account, which often has starting capital between $1,000 and $5,000. Failure to follow proper risk management rules means that a series of four or five losing trades is enough to wipe out at least 20% of the account balance. It won’t stop there, the frustration of losing will lead to more mistakes being made. In other words, a large amount of virtual money on the demo account can ultimately lead to negative and unwise behavior when trading on the real account.

The influence of emotions

Emotions and emotional aspects play a major role in trader performance. This is no different even for traders who have technical and fundamental analysis skills as they may struggle to control feelings of anger, greed or fear when trading the forex market. A demo trader does not usually experience such emotional stress, even when confronted with unexpected events such as a sudden trend reversal,