What is the difference between virtual and live on forex trading? There are so many comments on the topic, but if I can sum it up here, it is essentially a difference about our feeling in treating virtual funds compared to real money.

What is the difference between virtual and live on forex trading? When that question is asked, some people may answer, Virtual trade usually can profit...but live trading means loss..., or else, Virtual trading lacks sensation, live is more challenging, or Virtual trading is easier, there is no loss of funds... There are so many comments on the topic, but if I can sum it up here, it is essentially a difference about our feeling in treating virtual funds compared to real money which lead to difference in decision making during trading.

 

Practice Forex Trading With Virtual Or Live Account?

So, if virtual funds are different than real money, then what is the use of demo trading? Well, training with virtual account before starting live trading is basically very important for forex trader candidates especially to understand the market, indicators, and other mechanisms.

Practice

The problem is, many beginners feel impatient in prolonged demo trading with virtual account. Because of that, they went directly to live trading by thinking that there is no advantage can be taken from virtual. They considered it meaningless when they can't withdraw anything although managed to make profit. But well, if I may say something to them, You can say that when you have made profit, but what if you suffer losses or margin call?

I understand the impatience felt during demo trading. People usualy went straight to live account as soon as they know how to order buy/sell. Frankly, I was impatient too. First time I trade demo, I got out after the first week and went live. The result? margin call in a week. That is when I realized that my skill is extremely insufficient and went back to virtual account.

There are some tips from senior traders in relation with training with virtual account:

1. Use virtual funds as much as the funds we are planning to deposit in the future.

If we plan on depositing 1000 USD, then use only that much virtual funds. The purpose is for us to not only learning analysis but also managing margin. Many friends who excels at demo trading lose out at live because there is no margin limit in virtual account. Forex brokers usually gave us relatively huge amountof virtual funds so that we can let a position to float hundreds or thousands pips. But then, after opening trades in live account with significantly smaller funds, the habit of letting floating position go on will soon invites losses and margin call.

2. Use the same leverage between virtual and live accounts.

This is in order for us to get used to the leverage. So, if we want to use 1:500 in live account, use as much leverage in virtual account. Treat virtual funds like real funds and regret it when you lose it. Or alternatively, like my friend said, trade in live account as if you used virtual funds, so we can trade without unnecessary burdens.

 

When To Leave Virtual Account And Start Live Trading?

The next question people often asked is about when to graduate from virtual account and start forex trading for real. Well, as long as you have abided aby the previous suggestions, here is some signs that point to the right moment to start trading on real account:

 

1. You can produce profit consistently.

It does not mean that all your strades should profit. It is just that you can make consistent profit from time to time despite of losses every now and then. Check your trading history each month and start trading only when you have satisfactory result for several period. Preferably, the result is something than can be put into a winning probability of 60% or more.


2. You can run your strategy free of emotional interference

Beside of understanding the market, another purpose of practice forex trading in virtual account is to establish a reliable strategy. Of course, if you have already managed to produce consistent profit, chances are you already have a quite reliable trading strategy and money management. But can you roll out your strategy with the correct money management without feeling greed, fear, or other disturbing emotions? If you are able to do that, then consider yourself ready to trade in live account. Contrarily, if you are still easily get mad or lose spirit after consecutive losses, then keep away because you are not ready yet.

 

3. You can comfortably trade with your broker and trading platform

The third purpose of demo trading is to test the water, that is to know how suitable is the broker and trading platform that you used with your trading style and whether you can get used to the trading environment they created. In this one, you ought to make sure that your established strategy can run smoothly and your broker is fairly reliable.

If you have passed the three signs, then feel free to deposit and trade in a real account. It does not necessarily mean that you will be able to reproduce the result gained in virtual account though; it just means that you have gained the necessary understanding and feel of forex trading. For some people, experiencing margin call in the early days of trading is considered as some kind of rite of passage, just like how a kid will fall from bicycle at one time or other. The important thing to remember is to not give up after the first failure and keep trying.