What is the difference between trading a

demo account and live forex trading?

Forex demo and live trading account

If you are new to the world of forex trading, then an obvious question that would come to your
mind is what is the difference between forex demo account trading and forex live
account trading? Often traders deposit the trading money with a broker in the hope of earning
higher profits. However, soon they realize that depositing money with a broker is not the best of
the options. This is precisely why they opt for demo account forex trading. Once familiar with the
demo account trading, traders take the next step forward in the form of forex live
account trading. Forex live trading, as the name suggests is all about trading in the real forex
market or environment. In this article, we will help you to understand the differences between
the forex demo account and live trading.

Forex Demo and Live Account Trading -The

Differences
Traders, especially those are planning to enter the forex market, turn to demo account trading to
get a feel of the market and the real world trading environment. In simple terms, a demo trading
account allows traders to trade fake money by mimicking live forex prices. A demo account
helps traders to practice trading beforehand and determine the potential risks of trading since
they get to trade in a risk-free environment. On the other hand, a forex live account trading is
meant for traders who are experienced enough to calculate their risks and place accurate or
profitable trades. In a live account, you get to trade with real money and your profits/losses are
for real. During live account trading, forex traders may also experience that their orders are not
getting filled at the right time. This is because they get to trade in a completely different trading
environment.
Apart from order execution, there are many other differences between a forex demo account as
well as live forex accounts trading. For instance, a trader never gets re-quoted in the forex demo
trading as they trade in a controlled environment. In the case of live forex trading, traders get a
lot of re-quotes and need to adjust with them as and when they are provided.
Also, spreads are tighter for traders when they engage in demo trading whereas in live forex
trading the spreads can be different by around 1 pip. This is much more evident when a trader
trades with a broker that offer variable spreads, wherein the conditions of the market as well as
the providers of liquidity rule the spreads.
In demo trading, stop-loss orders are always perfectly executed. But, in live forex
accounts, trading traders always find that their orders have been executed at high levels by the
broker, thereby putting them at a slightly higher risk as compared to what they had expected.
It must be noted that one of the major reasons behind the differences that arise between live
forex and demo trading environments can be attributed to the data feed. Brokers are required to
pay a specific amount of fee to gain access to the live forex market quotes. In addition to this,
there are extra overheads like the fee that needs to be paid to the liquidity provider, which
eventually makes it slightly expensive.
On the flip side, a forex demo account can be created for free, which is why brokers do not
provide live feeds to demo traders, which makes the demo forex trading environment completely
different.

So, what really is the purpose of a Demo Forex Trading

Account?
As already stated above, a demo trading account is meant for traders who are new to the forex
market and want to get a feel of how things work in real or live forex environment. It basically
helps traders to test their strategies and determine whether they actually work or not. Hence, the
main purpose of creating a forex demo account is to understand how the platform works.
Traders, especially those who have new entrants in the world of forex trading must use their
demo accounts to test every single button or feature that the platform offers. This will help them
to transition to live forex trading quickly and efficiently.
Apart from this, they must also have an understanding of the different types of orders and the
manner in which they must be executed. With a demo trading account, traders can easily choose
as well as execute their orders without the fear of losing their capital amount. Traders must
understand the basic difference between a pending order as well as the market. They should
also know how a stop loss order works as opposed to limit orders as well as how they can place
SL (stop loss) and TP (take profits) orders for their trades. In addition to this, they must also
realize what would happen if the price reaches those limits or orders. By experimenting with
different features and possibilities and determining how things work in the forex world, traders
can gain the experience required for trading in the live forex market.
In essence, demo trading is available for a period of three months or so. During this time, traders
need to pay close heed to the market dynamics, as well as the manner in which the price moves
up or down. When traders gain an understanding of how prices differ in different forex markets
as well as with different forex pairs and time frames, they are able to trade better.
Conclusion
To sum up, both forex demo account trading and forex live account trading are different from
each other. Demo trading helps you to understand what real or live forex trading can be like.
Once traders have gained some demo and live trading experience, they need to exercise control
over their emotions and know when to enter or exit the market to be able to trade profitably. It is
equally important to understand Forex signals and how do Forex indicators work. Learn to
handle the pressure that lives forex trading brings along with it. Traders should neither cut their
profits early nor become too greedy and not close their profitable trades on time.
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