Some may say it will take about 6 months, some choose to repeatedly go back, some even suggest to ignore it completely. What is the right answer when it comes to the right duration in demo trading?
Before trading forex with a live account, you must use a demo account, irrespective of your strategy or technique. Whether it is price action, technical analysis, fundamental analysis, or other methods, trading a demo account is crucial in determining the best way to approach your forex trades.
The question many beginners tend to ask when they are about to trade with a demo account is how long will it take? The truth is there is no definite answer to that because it varies from one person to another.
In general, the duration of using a demo account can be divided into several groups, including:
- To learn how trading works: At least three months.
- To test a strategy: One to three months.
- To get familiar with a brokerage platform: A few weeks.
Basically, each purpose of using a demo account requires focus and different periods for maximum results. Why so? Let's learn below.
How Long Should Beginners Use a Demo Account to Learn Trading?
The time beginners need to use a demo account before trading with real money will vary depending on the individual. As a general rule of thumb, beginners should use a demo account for at least three months before trading with real money.
Some beginners may need more time, while others may be ready to trade with real money after three months. The most important thing is to ensure you are comfortable with the risks of trading before trading with real money.
However, there are a few general guidelines that beginners can follow to accelerate or shorten the duration:
- Start with a basic understanding of trading concepts.
- Set realistic goals.
- Don't be afraid to make mistakes.
- Keep a trading journal.
How Long Should Traders Use a Demo Account to Test Their Strategy?
Like beginners, the time traders need to use a demo account for testing strategies will vary depending on the individual and the strategy. However, as a general rule, traders could use a demo account from one to three months to test a trading strategy.
For instance, position traders who maintain trading positions in the forex market for weeks or months will need to spend more time on a demo account than intraday traders who only hold trading positions for hours or days.
However, even if the trader is interested in intraday trading with very short time frames, such as scalping, they will still have to trade on a demo account for a minimum of three months before opening a live account.
During this time, traders should focus on:
- Understanding the strategy.
- Backtesting the strategy.
- Adjusting the strategy as needed
Once traders are confident that the strategy works well, they can start using it in the real account.
How Long Should Traders Use a Demo Account to Check a Broker?
The time a trader needs to use a demo account to evaluate the quality of brokerage services can vary depending on various factors. As a general guideline, using a demo account for at least a few weeks can give traders a reasonable idea of a broker's quality.
However, it's essential to remember that a demo account may not fully replicate the experience of live trading, as there can be differences in order execution, slippage, and liquidity between the two environments.
During this time, traders should focus on the following:
- The speed of execution: Traders should test the speed of execution of the broker by placing a few trades. If the trades are executed quickly and without any, this is a good sign of the quality of the brokerage services.
- The spreads: Traders should also check the spreads offered by the broker. Spreads are the difference between the buy and sell price of an asset. Lower spreads are generally better, meaning traders will pay less in trade fees.
- The commissions: Traders should also check the commissions charged by the broker. Lower commissions are generally better as traders will keep more profits.
- The platform: Traders should also test the trading platform the broker offers. The platform should be easy to use and navigate and offer all the features traders need to trade effectively.
- Customer support: Traders should also test the customer support offered by the broker. If traders have any questions or problems, they should be able to get help from the broker's customer support team quickly and easily.
If a trader is happy with the quality of the brokerage services during their demo experience, they can switch to a live account and start trading with real money.
What Happens If You Finished on Demo Account Too Quickly?
The truth is that using a demo account to trade goes beyond ascertaining the success quotient of a strategy in a live market (although it is a major part of it). This is because there is also the aspect of getting to know who you are as a trader. A few things can happen if you take too quickly on a demo account. Here are a few of them:
- You may not learn the basics of trading properly. Demo accounts allow you to trade without risking any real money, which can be a great way to practice trading without financial risk. However, if you trade too quickly, you may not have enough time to learn the basics of trading, such as how to read charts, place orders, and manage risk.
- You may not be able to identify your strengths and weaknesses. Demo accounts allow you to trade without any financial risk, which can be a great way to identify your strengths and weaknesses as a trader. However, if you trade too quickly, you may not have enough time to learn your trading style and what works best for you.
- You may not be able to develop a trading plan. A trading plan is essential for success in trading. It helps you to define your trading goals, identify your trading strategy, and manage your risk. If you trade too quickly, you may not have enough time to develop a trading plan that is right for you.
If you are serious about becoming a successful trader, using your demo account wisely is essential. Don't trade too quickly, and take the time to learn the basics of trading, develop good trading habits, identify your strengths and weaknesses, and develop a trading plan. Following these tips can increase your chances of success when trading with real money.
What Happens If You Take Too Long on Demo Account?
You might be wondering why using a demo account for an extended period is necessary, especially if you only use a trading strategy with a short time frame. However, using the demo account for too long can also have some negative effects, including:
- You may become complacent. When you are not risking real money, getting lazy and not taking trading seriously is easy. This can lead to complacency, which can be a major obstacle to success in trading.
- You may become demotivated. If you are not seeing results on your demo account, it can be easy to become demotivated and give up on trading. Setting realistic goals for yourself and tracking your progress over time is essential.
- The market may change. The market is constantly changing, and what works on a demo account today may not work in the future. This is why it is important to keep up to date with market trends and to adapt your trading strategy accordingly.
- Missed opportunities. The financial markets constantly change, and trading opportunities may come and go. If you spend excessive time on a demo account, you might miss out on potentially profitable trades in real market conditions.
If you are serious about becoming a successful trader, using your demo account wisely is essential. Please don't take too long on it; make sure you are constantly learning and improving. Following these tips can increase your chances of success when trading with real money.
Bottom Line
Once you have figured out the necessary aspects of trading by generating results on the demo account with consistent profits, you may be ready to transition to a live account.
The recommended time to spend on a demo account depends on the purpose for which it is used. For beginners, it is recommended to use a demo account for at least three months, while for strategy testing and knowing the quality of the broker, it is at least a few weeks to 1 month.
The good thing about the demo account is that even after you transition to a live account, you can always come back to it for re-evaluation if things do not go as planned once you move to a live account.
This is a common trend among forex traders now and then. They return to the demo account to adjust their trading strategies to get better results in the live market.
If you have difficulties looking for the right platform to demo trade, here are some of the best-recommended ones in the market.
8 Comments
Dec 24 2022
For me, the trading period on the demo account is 6 months. Based on my experience, I have been demo trading for 6 months to make sure my trading strategy is beneficial to me. It also takes time to find a trading system that suits you. 2 months to find the best trading system, 4 months to try to apply it, you can reap the benefits of narrow targeting. But that's based on my experience, others may differ.
Feb 26 2023
Enzo: I think 6 months is not enough. I think it will take at least 8 months to a year. Because I think a forex strategy should be proven in all market conditions during a swing or during a sideway. You may or may not agree, but for me it's not about experience level, it's also about testing a strategy that takes time to prove itself.
And I think the longer you stay in a demo account, the better you get to know the forex market itself. You can switch to a live account when you are ready
Feb 26 2023
Jamal: I think there are different views on the trading period on a demo account. In short, I agree with the author. He has four types of strategy trading to choose from. Scalping, day trading, swing, position trading. All of these trading requirements vary greatly depending on the trading hours. Scalping is done in minutes. Day trading lasts only one day. Swing trading, on the other hand, can take days or even weeks. And position trading continued for weeks and months.
The key to stopping a demo account and running a live account is having a strategy that works. The problem is that it takes time to prove a strategy. As I said earlier, proving if a scalping strategy works can be quick as it can be done in minutes. It may only take 2-3 months before you are ready to trade your scalp on a live account, but if you want to prove if your position strategy is perfect, it will take weeks or months, so it can take up to 6 to 6 months. It may take a month or more.
Jan 1 2023
I think that demo is a great tool for beginners to form and test their trading strategies or trading systems. Most of people think demo trading is useless. Because there is no actual money involved for psychological trading skills. But I argue that demo should be treated at an ideal situation for ideal performance. So that in the actual live trading, beginners should aim to performance as good as their demo trading performance.
Jan 16 2024
Hey, I've got a question. The article emphasizes the benefits of starting with a demo account. However, based on my experience and personal opinion, demo accounts can sometimes lack challenge. What I mean is, if you incur losses, you can keep reviewing and repeating the process in a sort of endless loop, which can be quite tiring.
I've noticed that some brokers also offer cent accounts, where you can experience both profits and losses in cents or real money. This adds a level of challenge and motivation. But I want to ask, generally speaking, for beginners in trading, do you recommend starting with a demo account or a cent account?
Jan 22 2024
For novice traders, the choice between a demo account and a cent account depends on individual preferences and learning styles. A demo account provides a risk-free environment to practice and understand the basics of trading. It allows beginners to familiarize themselves with the platform, test strategies, and gain confidence without risking real money. However, as you rightly pointed out, it may lack the emotional challenge associated with actual losses.
On the other hand, a cent account offers a middle ground. It involves real money, albeit in smaller denominations (cents), introducing an element of risk while keeping the stakes low. This can be motivating and provide a more realistic experience compared to a demo account.
Ultimately, the decision depends on the trader's comfort level and objectives. If someone prefers a safe learning environment initially, a demo account is suitable. If they want to experience the psychological aspects of trading with real but minimal risk, a cent account might be more fitting. Some traders may even choose to use both, starting with a demo account and gradually transitioning to a cent account as they gain confidence.
Apr 25 2024
I believe demo accounts are invaluable for novice traders to develop and assess their trading strategies. While some see demo trading as ineffective due to the lack of real money, I argue it's an ideal environment for skill-building. Treating demo trading seriously allows beginners to replicate success in live trading. By using demo accounts, traders can refine strategies without the pressure of financial losses, focusing solely on skill improvement. Rather than dismissing demos, beginners should embrace them as crucial learning tools. Through dedicated practice, they can bridge the gap between demo and live trading, translating skills honed in demos to real-world success. It's essential to recognize the value of demos in building a solid foundation for trading.
Apr 26 2024
I have some reservations about the effectiveness of demo accounts for novice traders. While they offer a risk-free environment for learning, the absence of real money can undermine the psychological aspects of trading. Emotions like fear and greed, which play a significant role in live trading, aren't fully simulated in demo accounts. Consequently, traders may not experience the same pressure and emotions they would in live trading, potentially leading to overconfidence or unrealistic expectations.
Instead, I'm considering exploring cent accounts, which allow traders to trade with small amounts of real money. Unlike demo accounts, cent accounts provide a taste of real trading conditions without exposing traders to significant financial risk. By trading with cents instead of dollars, beginners can experience the psychological aspects of trading while still maintaining low risk. This hands-on experience can be more valuable in preparing traders for live trading than relying solely on demo accounts.