Advancement in technology has benefited the retail investors immensely. In the past if you had to learn the basics of trading you had to go to the broker office and learn how the currency market works. Technology has revolutionized the way trading is done. With paper trading one can learn trading without much hassle and risking any money. If you want to be a good trader, you should first trade virtually. You will lose this game if you take the plunge directly with real money.
Benefits of Demo Trading
Demo trading helps you to know the trading platform better. Things like how to place order, how to put a stop loss, closing the trade etc can be learned without a penny. If you want to test a new trading strategy, you can do so with the demo account. Even experienced traders use demo account to test the new trading strategy first. You will save a lot of pain if you trade with demo account first.
Start with a Micro Account
Let’s assume that you have done demo trading for few months and want to go live. Before you fund your account, you should be aware of different phases of going live. It is necessary to demo trade first. But trading live is completely from demo trading. Emotions can come into play if you lose money on some trades. You can work on controlling the emotional decisions. Before opening a real account with the full amount, you can open a micro account with a very small amount say $ 200. Almost all the brokers allow you to trade with a small account. You can work on controlling your emotions with the help of micro account. This way you ensure that you don’t lose much if do wrong. But make sure that you don’t expect to turn $ 200 account into a million dollar account within a year.
Invest Only Half the Amount
After you have traded the micro account for a while, its time to jump in and make serious money. But invest only half of the amount you initially planned. The logic behind this is that you don’t lose lot of money if you take emotional decision. Remember you are still a novice trader. You are not in a position to make lot of money. If you do well in this phase of trading and also in previous phase of trading micro account, it will boost your confidence tremendously.
Trade with Full Amount
Invest the full amount only after you trade with half the money successfully for 3 months. If you lose 10% of the account, stop live trading and return to demo trading. This is difficult decision as most people can’t admit their failure. They end up blowing the account completely. You don’t want to do that mistake. Do you?
It is long process till you become a successful trader. Only those who are willing to stay in for a long haul win in this game. You will already be in the top 10% if you understand this fact. With meticulous effort of improving your skills as a trader will make your dream of making serious money come true.