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Trading on a demo account has its pros and cons. By trading on a demo, a trader becomes better acquainted with the platform, learns to understand trading tool indicators, and can pre-test his strategy before switching to a real account. The disadvantage of a demo account is the psychological aspects. On a demo account, a trader is not afraid of losing money and, therefore, is inclined to take more risks. If this leads to a positive result, the same approach can lead to a relatively quick reset of the deposit when switching to a non-real account.
How can you improve your trading skills on a demo account while eliminating the psychological factor? There are several techniques for this. Let’s look at each of them in more detail.
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Demo account = real account
Let’s say a trader needs to test new indicator settings or optimize other strategy elements. It is necessary to psychologically try to give the demo account more weight than it has. To do this, you must constantly try to put an equal sign between the demo account and the real account and treat the funds in the demo account the same way as if they were real money.
A trader trading on a demo account may be more susceptible to impulsiveness in opening his trades. In professional terms, he is increasing his strategy’s discretionary (intuitive) component. By adhering to the formula demo account = real account, a trader can be more confident in the objectivity of his decisions on a demo account.
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Duplicate transactions
If it is difficult for a trader to work according to the formula demo account = real account, they can duplicate transactions on a real account. In this case, the size of positions on a real account must be reduced several times. Let’s assume that a trader trades a fixed amount of $100 on a demo account. When opening each trade, the trader must duplicate this operation in his real account, say for 1 dollar. This will give you the same feeling as when trading on a real account. So the formula demo account = real account will work.
Exercise “Trading Mentor”
This is a reasonably well-known technique, described in the book The Psychology of Trading by Brett Steenbarger. The trader should imagine that there is a student next to him to whom he explains how to act in the market. Every time a trade is opened on a demo account, the trader tries to explain the reason for this trade to his imaginary friend.
This technique will develop in the trader the habit of “slowing himself down” by trading not only on a demo account but also on a real account.
A demo account is like taking a test drive of a new car. However, remember that you can get into an accident during a test drive. After all, even if you go for a ride, the best guarantor of safety will still be you.
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