What is paper trading? paper trading is also the same as a demo account, using a demo account for beginners will be risk-free.
Maybe just now learn about forex (newbie), or you are in a position to learn forex trading.
So, it’s a good idea to get to know what a forex paper trading account is and know how to make this very useful and free demo account.
Learning with the Demo Account or paper trading allows beginners to practice forex trading in real market conditions.
But without the need for real money capital, because only use virtual money.
This is the best choice for traders who are new to forex trading.
Or traders who want to test the trading system before using it on a real account.
The Demo Account or paper trading can also be used as long as you want, to be sure and steady on certain trading systems.
Forex trading exercises with this Demo Account have no risk of material loss.
But what is gained about real trading may be inappropriate, from psychological conditions.
TenkoFX with the support of Metatrader 4 allows you to learn to trade using a demo account, or another term is risk-free paper trading.
Before continuing by selecting the appropriate trading account.
You will learn with a TenkoFX demo account to test your trading skills.
What is a Demo Account?
The development of technology and the internet is very influential in the world of trading, one of which allows the public to try trading simulation accounts with real market data. This is called a Trading Demo account.
Many brokers and financial media, especially in the forex and stock markets, provide facilities for demo trading account simulation, which allows us to easily register and practice with demo trading,
What is a Demo Account? The demo account itself is an account that is used as a medium for learning.
In this demo account, the money used is only fake, not real money. To try a demo account you don’t have to have money, because you can enjoy a demo account for free and until satisfied.
Benefit Demo account.
Traders can see price movements in the forex market on applications provided by brokers along with demo accounts.
Plus, traders can also execute buy/sell or close trading positions (close), practice strategies and so on completely and thoroughly by actual market conditions.
It’s just that, to use a forex demo account, traders don’t need to provide funds or capital.
On a demo account, funds (balances) on a trading account are virtual funds (not real money), brokers provide this facility to traders.
Therefore, if it is profitable, the profit cannot be withdrawn. Conversely, if you lose, then you also do not have to bear the loss.
Don’t to be afraid; The broker will not charge you to compensate for losses incurred in the forex demo account.
The goal of a Forex Demo Account.
- For beginner traders (newbie), forex demo accounts will provide a very real condition market of online forex trading.
- Forex demo accounts are useful for maturing skills in trading before a trader decides to use a real account because at the same time practicing trading analysis and execution.
- Beginner and experienced traders can use demo forex accounts to test trading systems freely, without the need to fear loss if they make a mistake.
- For traders who are still looking for the best broker, they can register a forex demo account to see how the broker’s technical performance is in terms of server speed, execution, etc.
Important points in a demo account.
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Forex Trading Exercises With Intention to Find Experience.
Before venturing into the forex market, you must learn it first. Engaging in forex trading with little or no experience will only produce painful results.
Without practicing forex trading, you might lose most of your capital and become frustrated because at first, you thought it was very easy to make money in forex.
Create Demo Trading Conditions According to the Real Trading Account Plan.
Simply put, if you plan real trading later with a capital of USD1000, lot 0.01, and leverage of 1: 100, then when configuring a Demo Account, make and do it like that. In this way, you can understand how well the trading system works for potential profit and loss faster.
Don’t Limit the Length of Exercise with a Demo Account.
We recommend that you survive forex trading exercises on a Demo Account to be able to show consistent and good results.
You have to be patient; and remember that your goal here is to learn trading techniques, create a better trading system, and master trade psychology that you can later use when trading with real accounts.
Difference between Paper Trading and Real Account.
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Many beginners think that when doing transactions through a demo account and real account it is the same but this is not true, because there are some differences for traders and technical levels. This is the main one:
Virtual Money and Real Money.
One of the main differences in demo trading, we do not use real money, whereas, in real trading, we use our own money that we have collected from hard work.
Whether we realize it or not, this money factor is very influential in our psychology when doing real trading.
This is because the demo trading cannot simulate trading psychology, although demo trading is able to simulate trading techniques well.
Trading on a demo account is usually easier because there is no pressure at all on our psychology, but when trading on a real account, then the pressure on psychology.
Emotions will appear when trading on a real account. There are two psychological aspects that are very influential in trading psychology, namely Fear and Greed.
Basically, people are easily afraid of losing money. In a real account, if you lose, you really lose real money. This is what triggers fear in dealing with real accounts.
This fear can cause someone to easily cut loss and take profits because they are feared that the price will go down, so the profit earned is not as much as the demo account.
But someone also has greediness. Usually, because you want to immediately get a profit that was imagined before.
This makes it overconfident because before feeling easy to get profit on a demo account.
In this case, investors will usually add positions continuously if they are very confident with a stock regardless of the correct money management.
The difference in Liquidity.
One difference between demo accounts and real accounts also lies in their liquidity. On a demo account, there is absolutely no liquidity, meaning we only trade on our own, and there are no trading opponents.
In the market reality, there are always two parties, namely sellers and buyers. If there are 10 lots of buying positions in ABCD shares, so that there is a deal, there must be 10 lots selling positions in ABCD at the same price.
Both parties have resulted in a process of bidding and demand. While on a demo account, all orders can be executed without the need for two parties. That is why demo accounts are called simulations.
If we see demo accounts and real accounts, the main difference in technical issues is that whatever position we place (order) on a demo account is automatically executed on the broker’s server that we use.
Besides that there are many differences between demo and real accounts:
- Tick prices may be different between demo and real accounts.
- The highest and lowest prices can differ between demo and real accounts.
- Server response speed between demo and real accounts is different.
- Spreads on demo accounts are usually fixed. Spreads on real accounts can vary depending on whether the market is crowded or not. Data on demo and real accounts are different. Usually, the data on the demo account is more “smooth”
Although technically these differences are not so striking, they are quite influential in the mechanism of buying and selling that will be carried out by traders.
Maximizing Trading Demo.
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Despite the various shortcomings of a demo trading account, it is better for beginners to trade on a demo account first before going directly to a real account.
Beginner traders should be able to maximize the trading demo first.
Many prospective traders who make a demo account only as a place of trial and error, and less serious in planning a trading plan and trading strategy.
Usually, they only put up a position without thinking about the analysis, and sometimes after buying a stock position, just leave it for a long time without checking the demo account again.
To maximize the trading demo, we must prepare a trading plan. With the existence of a trading plan, we think of all aspects of trading that we unconsciously treat demo trading like real trading.
By preparing a trading plan like real trading, we will not be surprised if we have already plunged into a real trading account.
Real Account Trading Like a Demo Account.
Real trading certainly feels more difficult than demo trading but on the contrary.
If we can treat real trading like demo trading, it is expected that our trading performance can increase.
Here are some tips that can be used so that we remain calm and unaffected by emotions when trading on a real account.
None of the traders that never suffered a loss.
Every trader must have experienced it. Losses are natural and should be used as learning to sharpen subsequent analyzes.
If we have thoughts like this, then we will not experience the fear of losing money excessively, which can affect the trading plan that we have planned.
Don’t risk Urgent Money.
The next rule is to never trade by risking money that you don’t want to lose. Trading with free money, which, if lost, will not affect our psychology, so we are not too burdened in trading.
The trading demo is very useful for beginners to get to know the world of trading. The existence of a demo trading can make beginner trading familiarize themselves with the conditions and situations of the capital market.
But it needs to be underlined, demo trading is different from real trading. The psychological aspects that will appear in real trading will never be obtained with demo trading simulations.
Therefore, in running a trading demo, you have to be more serious in preparing a trading plan so you can train us in the right way so that when it comes to real trading.
We are no longer confused with technical matters and just face the psychological aspects that arise when using real money.