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How to use demo successfully to improve your trading tactics ?

October 18, 2011

A lot of beginners say that the demo account is not working for them to improve their trading skill.  This is because they don’t care about trading on demo as they don’t loose their real money. So from this post I am going to tell you how to use demo account to practice trading before you go into trade in real account. If you use this method to practice, it is guaranteed that you will never loose your money and you will be able to develop a good trading plan and a trading discipline.

First you have to open a demo account under a good forex broker who offers at least about 20 currency pairs and charges small spreads.I recommend following brokers  to open a demo account

http://www.fbs.com/

http://www.roboforex.com/

2  Usually brokers give about 50000 USD as virtual money. But don’t try to trade big lots like 1 or 2 lots. I recommend you to trade 0.01 lots as it is the minimum lot size and if you are going to open a real account with 100 USD it is the recommended lot size to trade with minimum risk.

3  Then next step is to set a target to achieve. Your target should be a profit of 100 USD as you trade 0.01 lots. If initial amount of demo account is 50000 USD, you have to increase your balance to 50100 USD to start trading on real account.

So start trading on demo until you reach the balance of 50100 USD. If you cant achieve that target you are not qualified to trade on real account. In first few months probably you will end up with losses even without maintaining the initial deposit. Never mind that it is the nature of forex. Everyone looses at the beginning.

5  Think that demo money as your real money and always try to be disciplined when entering to trades. Try to learn as much as you can reading ebooks and articles while trading to gather a good knowledge.

Don’t try to increase lot size and always keep it as 0.01 because if you loose, it is very hard to recover as it is a big amount and if you win and achieve the target, you might feel overconfidence about your performances and it is not good for trading.

7  After the end of the month look at your loosing trades and try to find out reason for those trades. Also look at your winning trades and try to remember those chart patterns that were successful. Waiting until best opportunities to appear in charts to trade is very important. You don’t need to trade always and if you get confused by chart patterns, don’t enter to trades and watch a movie. It is very important to protect your profits from previous trades.

Don’t let loosing trades to go more than 100 pips and don’t expect that loosing trades will  become wining trades after some time because price might never return to that position.

9  As it is very hard to catch a winning trade, hang on winning trade as much as you can if there are no supports or resistances nearby. Sometimes we can hold winning trades for several days if it is going our way.

10 Start trading with confidence in your real account when you reached the target of 50100 USD with the valuable lessons that you learned from demo trading. It takes some time to achieve that and during that period you will gain a lot of experiences as experience is the most important thing in trading.

Some successful strategies which you can use to improve your trading skills are discussed later in this blog. So try above method to improve  trading skills without loosing money and getting disappointed at the very beginning.

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2 Comments
  1. Thanks – Enjoyed this article, can you make it so I get an email when you write a fresh article?

    • Thanks I think you can subscribe to this blog. Im still new to blogging I will make this very interesting

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