Trading involves good planning and, of course, good implementation of the plan already in place. This is the hardest part because when you plan your trades everything looks nice and easy on paper, but when faced with the trading reality like fast moving markets, extreme volatility, slippage in broker’s quotations when trying to enter a trade, etc., then things start to look complicated.
When trying to develop your own trading strategy then the analysis is made normally on past data, taking into consideration things like candlesticks closing levels that happened in the past and trying to take those situations into account when looking for finding new trades in the future.
However, there is a problem with that and it is related with the fact that when doing your research the live trading element is missing, and this is being called either greed or fear. Human nature is making us weak even when dealing with our own plans. This is why it is recommended that when you have a trading plan or a strategy, try to run it on a forex demo account for a relevant amount of time until moving on a live account.
There are many reasons why you should do such a thing but the main one is that your capital should benefit the most out of this situation as capital preservation is the most important thing when trading. And testing the plan on a forex demo account preserves your capital as such a measure eliminates the risk of losing it based on insufficient testing, wrong planning, etc.
Trading on a demo account also helps in better knowing your broker and the services it provides, in getting familiar with the trading platform, trading conditions offered, etc., so all in all only positive aspects can come out of this. However, there is a catch, or a drawdown, depending on how you want to call it, and this is that the most important element that affects a trader’s decisions is missing: the live trading element. All your planning efforts, all the hours/days/weeks/months spent trading on a demo account may turn out to be useless if you are not able to control your emotions and get over the human nature obstacles when trading.
When trying to develop your own trading strategy then the analysis is made normally on past data, taking into consideration things like candlesticks closing levels that happened in the past and trying to take those situations into account when looking for finding new trades in the future.
However, there is a problem with that and it is related with the fact that when doing your research the live trading element is missing, and this is being called either greed or fear. Human nature is making us weak even when dealing with our own plans. This is why it is recommended that when you have a trading plan or a strategy, try to run it on a forex demo account for a relevant amount of time until moving on a live account.
There are many reasons why you should do such a thing but the main one is that your capital should benefit the most out of this situation as capital preservation is the most important thing when trading. And testing the plan on a forex demo account preserves your capital as such a measure eliminates the risk of losing it based on insufficient testing, wrong planning, etc.
Trading on a demo account also helps in better knowing your broker and the services it provides, in getting familiar with the trading platform, trading conditions offered, etc., so all in all only positive aspects can come out of this. However, there is a catch, or a drawdown, depending on how you want to call it, and this is that the most important element that affects a trader’s decisions is missing: the live trading element. All your planning efforts, all the hours/days/weeks/months spent trading on a demo account may turn out to be useless if you are not able to control your emotions and get over the human nature obstacles when trading.
