Almost all forex brokers offer you the opportunity to practice trading, but many experienced traders will tell you not to. Even if you have a small amount of capital at the beginning, but you have real money when trading, and you lose all your money one day, in the long run, it will be beneficial to develop your trading habits. why? Because paper trading builds bad trading habits.
Maybe only 1 in 100 people can effectively use paper trading to build good trading habits, but unfortunately that is not you.
Let's explore why demo trading is not recommended.
No.1
You don’t have the pain of losing money
Losing money is a good thing for beginners, it shows that you are not all smooth sailing in the market. This is not to scare you away from trading the market, but to make your account lose in proportion to your account size is to remind you that trading the market is tough.
No.2
You are used to trading larger amounts than normal accounts
Making large transactions in a simulated environment will make you prone to the psychology of making large transactions in a real account. Even if you maintain good money management principles, you will chase it with bigger trades after your first big loss.
No.3
You are more likely to overtrade
Demo trading provides spreads to simulate real transactions, but the spreads of simulated trading are sometimes lower. A trader can make a profit with a 0.5 pip spread, but lose money with a 1.3 pip spread using the same strategy.
For some brokers who use B-book, they usually want their clients to use simulated trading, by developing bad habits among their client base, they can get more profits from these bad behaviors.
END
simulated trading has no real risk, no risk, and trading is almost meaningless. Any time you eliminate the risk of an activity, you are creating inappropriate excesses that produce undesirable outcomes.
The risk of loss keeps us focused at all times. However, this necessary loss must be balanced against conventional psychology. In short, as we don't want to admit, most traders let the floating loss list keep carrying it, but prematurely close the profitable list. Most investors are very concerned about their winning rate. Of course, a high winning rate is good, but it does not mean that the final transaction is successful, nor does it represent a profit. If the amount of loss is far greater than the amount of profit, even if the winning rate is high, It is also a loss in the end. Therefore, investors should also consider the risk-reward ratio while paying attention to the winning rate. As the financial giant George Soros once said, "What matters is not whether you are right or wrong, but how much money you make when you are right, and how much you lose when you are wrong."
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Last updated: 09/14/2023 11:24
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