Search
Related Links

 

 

Informative Articles

5 Reasons to Trade Forex Instead of Stocks
While Forex trading is becoming more popular in the United States, the vast majority of investors still do not understand the massive advantages offered in the foreign currency market when compared to equities or fixed income trading. When...

A Informative Forex Broker Review
Gain Capial has set a high standard with trailing stops. The trailing stop can only be entered as a separate order. Once the investor is in an order he can enter his trailing stop limit in pips to trail the market the distance the investor has set...

FOREX ExpertAdvisor Mechanical Trading Systems: What Every Trader Should Know
iExpertAdvisor - "information and ideas about FOREX trading systems" FOREX ExpertAdvisor Mechanical Trading Systems: What Every Trader Should Know  Most successful FOREX traders use a handful of diverse trading strategies. Which...

Investment Formulas - What Purpose Do They Serve?
What exactly does a formula do? A complete detailed explanation can be as vast and complex as each individual investor and is beyond the scope of this article but a brief summary of a formula's usefulness would include the two primary functions...

Welcome To The World Of Forex Trading
You no doubt have a ton of questions and are eager to learn what this popular investment option entails. This site is designed to give you the tools and techniques necessary to make smart investment decisions. Spend a little bit of time reading...

 
Why Demo FX Account Performance Is Often Better Than Real Account Performance

Over the past several years, the popularity of online currency trading has grown substantially. Each day, online FX brokerage firms attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way, the market doesn't care whether you're a demo or real trader - so what is different? It's you who has changed. Not your personality, not even your trading style - but the factors that affect you are different.

What is the key factor to trading success?

The search for the "Holy Grail" of trading has been a common theme throughout the history of markets. There are a variety of different techniques. Those whom are inclined towards number crunching and pattern recognition may prefer technical analysis, whereas those more focused on the big picture, logical macro perspective prefer fundamental analysis. Then there are specific methodologies like swing trading, trend following or even more esoteric ideas like the Elliot Wave theory. Which one is best? There are examples of very successful traders using each methodology.

Since most new traders lose money - perhaps the more appropriate question to ask is, "What is the key factor to trading failure?"

Greed and Fear

Trading is an atmosphere rich in the porous emotions of greed and fear. The current price of a given security or financial instrument at any point in time can be thought of as the confluence of greed (bulls) and fear (bears). These two emotions make up the core of humanity itself. When market information is released, trading can be a high intensity experience. Sensing danger, your body releases adrenaline that acts to accentuate both your greed (fight) and your fear (flight). Because these emotions are so strong, they can cause you to act irrationally, ignore your system, stated set of rules or trading plan and to act upon impulse. Indeed, this is a genetically programmed response - but it is often also the trader's downfall, especially when he's playing with much better capitalized, more sophisticated and experienced foes that know how to manipulate those emotions.

When you are a trader - you are always under the influence of at least one of these two emotions, even if you don't have any trades on.

Impact of fear and greed on your trading

If the market's going up and you're in - greed is telling you to buy more and fear is telling you to take your profits while you still can. If it's going down, fear of being wrong makes you hold onto a losing position - and then greed sometimes convinces you to "average down" your position (and buy more) so it'll be easier for you to come back.

If the market's going up and you're not invested - fear is telling you that you're missing out on easy money but it's your greed that causes you to get in just after the greatest increase (just when its about to reverse course). If the market's going down and you're not invested - greed is telling you to get in as the price is cheap, while fear reminds you that you'll miss out on this opportunity if you don't act quickly.

Perhaps if we just felt greed, or just felt fear we would be able to control our emotions a little better. But when both of these little devils whisper into our ears at the same time - it is often impossible not to listen.

The Thrill of Greed

The first time you try FX trading - you will feel the thrill of greed. It is an ecstatic experience, your brain flush with neurotransmitters and your mind giddy with visions of untold riches about to be reaped. Greed is bold, aggressive and incredibly exciting. It can take hold of you both mentally and physically. Just imagine the possibilities!

This greed is what draws us into FX trading in the first place - the dream of easy money and 100:1 or 200:1 margin rates. It inspires us and causes us to forego rational thinking in favour of reckless abandon.

In the movie Wall Street, Gordon Gecko says, "Greed is good", but it is also very dangerous - especially if you are unable to recognize when greed is the one doing the talking. Greed is also one of the most common techniques used to manipulate people. Every get rich quick scheme, promising untold riches for no money down takes advantage of your natural predisposition to throw all logic and sense out the window when greed pays a visit. The argument starts to appear very compelling and you ignore what would otherwise be


clear warning signs. Like drunk goggles, greed can mislead you and when you eventually wake up you are often in a very precarious position.

The Fear of Losing

Fear can be equally as dangerous. The most potent and easily manipulated form of fear is your fear of admitting that you are wrong. Fear of having your precious ego bruised. This fear can cause people to do incredibly stupid things. The funny thing about this world is that everyone thinks that they are right. Most people would rather lose thousands of dollars than admit they are wrong. It is easy to feel ashamed of trading losses and live in denial but this is self-destructive behaviour. By denying the problem exists, you fail to take steps address it and only ensure that it will continue in the future.

Demo Trading

Demo trading is a great way to get started in foreign exchange trading. It is identical to real trading, except that you're using "pretend" money. Demo trading allows you to get a taste for what type of events move markets and how they move. It encourages you to learn more about geopolitics, macroeconomics and global finance and these are all incredibly positive things.

Demo trading also introduces you to the rapture of greed. Trading is a means to one of the purest, most raw and potent forms of greed. The whole point of trading is to make money and the more money you make - the stronger the pull of your greed becomes. It is intoxicating and can take complete control of you.

But demo trading does not introduce you to fear. There is no fear when you are demo trading. It is like you have a perpetual get out of jail free card. If you start losing badly on a demo account - simply start a new one. There is no accountability for your trading failures and only recognition of your trading success.

So your demo account does not teach you how to handle the emotion of fear. This emotion is most likely going to lead to your downfall. Greed may get you overextended, but fear will stop you from cutting your losses. You may think that fear of losing money would cause you to cut your losses, but the stronger emotion is fear of being wrong and that causes you to hold on to your losing position - until it's all gone.

There is also the issue of account size. Many demo accounts give you $50,000 to play with. This type of capitalization allows you to buy 5 lots (500K) of EURUSD pretty easily. If goes up 20 pips you've made $1000. Nice one. But when you open your real account - it's more likely that you put $5000 or $10000 in there to begin with. Now you're dealing with a 50K lot, which means you'll take $100 out of a 20-pip movement. But mentally you are used to getting $1000 for that movement so you usually end up risking more. Next thing you know - your 200K position has turned against you 50 pips and you've lost $1000. That's real money you just lost. You can't just start another account.

The capitalization of the demo account is sufficient to sustain losses and still come out on top. But your real account is likely to be undercapitalized and if you're trying to achieve returns similar to what you got on your demo account - you are going to blow up very quickly.

Being honest with yourself

Ultimately, while providing an excellent introduction to FX trading - demo accounts do not accurately predict whether you'll be successful trading real money. Markets are dominated by psychology and often go against what fundamental logic or technical indicators suggest should happen. The single most critical factor in your trading success will be your ability to control your emotions of greed and fear. These emotions cloud your judgment and cause you to trade recklessly. Demo accounts introduce you to the emotion of greed, but by their very nature they are risk free and therefore there is no fear involved. They are also likely to be better capitalized than your real money account, which misleads you with respect to the amount of returns you can expect to earn.

For all of these reasons, demo accounts allow you to avoid being honest with yourself and this is perhaps the most important factor of all. You need to know your edge and your limits and in order to know these - you must be honest with yourself.

This being said, demo accounts are still very entertaining and educational and I highly recommend opening one to anyone who's interested in getting a taste of the exciting world of FX trading. It's a great way to learn more about economics, global politics and yourself.

About The Author

William White is a software developer and avid foreign exchange enthusiast.

His website - www.financemaps.com offers free maps depicting short, medium and long range trends for the major currency pairs which allows the reader to easily get an overall sense of the global forex markets in a single glance.

 

Currency Trading, Forex Trading, Forex, Online Currency Trading
Offers 24 hour online currency trading for institutions and professional traders.
www.fxcm.com
 
OANDA FXGame - Currency Trading Demo Platform
You can start playing the currency trading market with real market conditions ... The platform was created with the goal of making currency trading ...
fxgame.oanda.com
 
Forex | Forex Trading | Forex Minis | Online Currency Trading
FOREX.com - THE site for forex trading. 24hr commission-free currency trading w/ real time execution and guaranteed fills. Forex mini accounts from $250, ...
www.forex.com
 
Currency Trading News, Forex Trading News, FX News, Forex News
Currency Trading News, Forex Trading News, FX News, Forex News - Daily FX.
www.dailyfx.com
 
Currencies - Currency Converter & Latest Rates at CNNMoney.com
Dec 6 1:18pm ET †, US $, UK £, Japan ¥, Euro €. US $, 0.5079, 115.05, 0.7517. UK £, 1.969, 226.50, 1.4798. Japan ¥, 0.008692, 0.004415, 0.006533 ...
money.cnn.com
 
FOREX Advisory
The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with ...
www.cftc.gov
 
Forex Trading: Online Currency Trading from Global Forex Trading
Global Forex Trading is the premier online foreign currency trading firm and a primary market maker. To learn more about forex trading, visit GFTForex.com.
www.gftforex.com
 
Amazon.com: Foreign Currency Trading: From the Fundamentals to the ...
Amazon.com: Foreign Currency Trading: From the Fundamentals to the Fine Points: Books: Russell Wasendorf by Russell Wasendorf.
www.amazon.com
 
Forex, Online Currency Trading, FX, Foreign Exchange | ACM Forex
Forex Trading with The Forex Broker. ACM offers online currency trading, commission-free, tax-free, lowest forex spreads on the market, guaranteed fills, ...
www.ac-markets.com
 
OANDA FXTrade - Currency Trading, Forex Trading, Online Currency ...
Currency Trading with FXTrade, leader in online currency trading, provides real-time execution, free forex charts and quotes, and 24 hour forex trading.
https:
 
Forex-Day-Trading.com - Currency Trading with FREE Training
Learn how to day trade currencies with our free training. Try a free forex trading demo for 30 days.
www.forex-day-trading.com
 
Forex Online Currency Trading: Welcome to Global Forex
Global Forex offers online currency forex trading at inter-bank FOREX rates. Try our FREE online forex demo trading system.
www.globalforex.com
 
Forex trading - Realtime Forex online currency trading
Realtime Forex offers commission-free online currency trading on live foreign exchange prices. Realtime Forex’s currency trading service also includes free ...
www.realtimeforex.com
 
Forex Blog
Forex news blog with daily commentary. Has a good beginner's article.
www.forexblog.org
 
Common Questions About Currency Trading
Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
www.investopedia.com
 
OANDA FXTrade - Currency Trading Basics
Currency Trading Basics. Exchange Rates and Spreads: ... In currency trading, these codes are often used to express which specific currencies make up a ...
fxtrade.oanda.com
 
Currency trading, free forex charts, news and analysis
Online currency trading with technical analysis, charts and forex news.
www.gfforex.com
 
Finance - Currency-Trading Ezine Articles
EzineArticles.com allows ezine or email list publishers to upload or download free expert content that can be used within email newsletters or websites.
ezinearticles.com
 
MGFOREX
MG Financial Group - Forex, FX, Online Forex Trading.
www.mgforex.com
 
DirectoryM - Debt Settlement Solutions
Simply provide your contact details and describe your needs to receive a free consultation from business or personal debt service providers.
www.directorym.com
 
 

 

Content Menu
  • 5 reasons to trade forex instead of stocks

  • 6 ways to buy real estate without a deposit

  • advantages of trading forex over stocks and commodities

  • advice for international investors on how to safeguard their profits

  • all the truth around e currency

  • american blind pools

  • an explanation of forex trading

  • an informative forex broker review

  • an open invitation to frustrated forex traders that desire unlimited success in the market part 1

  • ask for more you may get it

  • assessing the opportunities presented by the new iraqi currency

  • avoiding forex related frauds and scams

  • avoiding forex related frauds scams

  • a beginners guide to forex

  • a comprehensive forex broker register

  • a guide to swiss banking part 1

  • a guide to swiss banking part 2

  • a informative forex broker review

  • a look at forex market makers

  • a look at online forex brokers

  • a new and better way for pensions

  • a new and better way with pensions

  • a review of automated forex brokers

  • a short introduction to forex

  • bankers banks the role of central banks in banking crises

  • beginning forex how are lots traded what the heck is a pip

  • benefits of forex trading

  • bollinger bands

  • business and the forex

  • buying your tax haven corporation

  • choosing a forex broker

  • choosing a forex strategy

  • choosing ecurrency exchange training courses what should you look for

  • choosing the right forex broker

  • comments on forex trading account sizes lots and margin calls

  • currency trading an introduction

  • currency trading finding your niche

  • currency trading for internet profits

  • currency trading getting wealthy from currency trading program

  • currency trading how big is this thing

  • currency trading is not the monopoly of the nerds and the geeks

  • currency trading the future of investment

  • currency trading tips for beginners

  • currency trading understanding the basics of currency trading

  • day trading forex market behaviour

  • discover an effective forex trading system

  • discover the biggest trading investing online mistake

  • dont be a victim of cybercrime

  • dxout e currency exchange program and free training

  • emotions a traders worst enemy get rid of fear and greed youll be glad you did

  • energy prices inflation and forex

  • example of a profitable transaction in forex

  • export to america

  • e currency exchange scam

  • e currency exchange trading

  • e currency if forest gump was here this is what he would be doing

  • e gold investing make money with currency trading

  • e gold investments investing smartly with e currency exchange

  • factors influencing a currency pair exchange rate

  • fear and the profitable forex trader

  • financial trading so many markets so little time

  • five reasons you have to start forex trading

  • forexinterbank forex trading course for day traders and small investors focusing on forex pivot point trading

  • forex 101

  • forex 101 make money with currency trading

  • forex and daytrading

  • forex and the anatomy of an elliot wave

  • forex basics make money with money part 1

  • forex benefits of trading the forex market

  • forex benefits over futures

  • forex brokers

  • forex brokers helping to maximize your success

  • forex broker commissions

  • forex broker involvement optional

  • forex capital markets and foreign exchange transactions

  • forex currency trading basics

  • forex day trading

  • forex expertadvisor mechanical trading systems what every trader should know

  • forex glossary

  • forex made easy for everyone

  • forex market offers opportunity and information

  • forex online trading an introduction

  • forex pivot points mapping your time frame

  • forex profits

  • forex scams how to spot them a mile away

  • forex signal services

  • forex trading

  • forex trading and the characteristics of bar and candlestick charts

  • forex trading best practices

  • forex trading can be like day trading

  • forex trading create fantastic wealth from forex trading

  • forex trading for the little guy

  • forex trading how to create fantastic wealth from forex trading

  • forex trading indicators and the ever changing market conditions

  • forex trading investment secret of the rich and powerful

  • forex trading margin usage and introduction to hedging

  • forex trading online 7 reasons why you should

  • forex trading online 7 reasons you should

  • forex trading opportunities for individuals

  • forex trading platform

  • forex trading risky business

  • forex trading strategies

  • forex trading the perfect forex trading system

  • forex trading tips

  • forex trading understanding commissions spreads and trading costs

  • forex training follow your gut or your broker

  • forex versus futures

  • forex versus stocks

  • forex what is it and how does it work

  • forex why psychiatrists make better traders than expert economists

  • generate traffic and make money

  • getting a forex trading education

  • gods diplomacy international trade and the macedonian economy

  • going global

  • gold heading to 1 000 an ounce 13 reasons why this can happen

  • gold miningstocks com reports industry expert forecasts for gold stock investment strategies

  • goodbye multi level marketing and hello e currency exhcange

  • go public young cfo go public

  • hawala or the bank that never was

  • hawala or the bank that never was part i

  • home based business opportunity secrets of success in home based business opportunity exposed

  • honest business opportunity or fraud

  • how bollinger bands can tell you what the forex market will do next

  • how can i make money currency trading

  • how does foreign exchange affect your business

  • how does forex compare to other investment markets

  • how does the exchange rate exactly works

  • how do other countries devalue their currencies

  • how is forex trading at home possible

  • how i quickly doubled my money

  • how many forex order types there are and how to use them in your favor

  • how to choose a forex broker

  • how to choose wisely a forex broker

  • how to make big profits with currency trading systems

  • how to profit from ben bernanke a volatile federal reserve

  • how to save money on your overseas property purchase

  • how to sell hobby items by mail

  • how to start trading the forex market

  • how to start trading the forex market part 2

  • how to start trading the forex market part 3

  • how to start trading the forex market part 4

  • how to start trading the forex market part 5

  • how to trade currency

  • if you start your own home business what sort of business would you choose

  • impress your date with forex trading lingo

  • income opportunities for adventurers

  • index

  • interested in forex trading

  • internet marketing vs forex currency trading

  • introduction to bollinger bands a great help in forex trading

  • introduction to forex

  • introduction to forex trading

  • introduction to fundamental analysis forex

  • investing how to profit using formulas

  • investing in forex or investing in stocks understand the benefits and risks of each market

  • investing vs trading who cares anyway

  • investments short term or long term

  • investment formulas what purpose do they serve

  • investors what separates the good traders from the bad traders

  • is forex trading better than stocks

  • is my money safe on the soundness of our banks

  • is our money safe part ii

  • is there any money left in currency trading

  • is this really a recovery

  • is trading e currency a legitimate business

  • learn by hands on forex trading demo accounts vs mini accounts

  • learn currency trade intro to the forex market

  • learn forex

  • learn forex trading a guide for beginners

  • managing bank liquidity in real time

  • managing the forex accounts for you

  • mazu e currency exchange

  • mazu e currency exchange home business

  • mazu e currency exchange program

  • mazu e currency program and sports arbitrage trading reviewed

  • mazu review

  • money laundering in a changed world

  • money laundering in a changed world part ii

  • money smart homeowners use this mortgage strategy every time

  • moving averages basics and how they help forex traders

  • my most recent experiences about e currency exchange trading

  • new business real life dollars buy in game currency

  • new forex trading system gives average traders the edge

  • new opportunities with forex trading

  • online forex

  • online forex trading

  • online shopping the joy of online shopping

  • on the soundness of our banks

  • open source erp for smes

  • option arbitrage in the forex market

  • pivot points in forex mapping your time frame

  • poor mans access to foreign currency trading

  • real life dollars buy virtual game money

  • return on investment guidelines

  • rotator

  • secrets to potentially making money in the forex markets

  • sending signals for trading in forex

  • short introduction to elliot waves as a resource in forex trading

  • should you use a private wealth management broker

  • some reasons why you should trade forex and two important forex concepts you must know

  • start making serious money in the forex market this year

  • staying out of trouble with ebays listing policies

  • stocks or foreign exchange which one

  • stock markets of the world

  • there are real live people behind currency trading

  • the 6 advantages forex trading has over other investments

  • the basics of forex

  • the benefits of trading the forex market

  • the best time to day trade the forex market

  • the china bubble

  • the day trade forex system how to choose an online forex brokerage firm

  • the duty of a forex market maker

  • the forex market explained

  • the forex trading system

  • the history of forex trading

  • the importance of developing your own forex trading system

  • the key to protecting your money

  • the meaning of forex price charts and how to use them

  • the miracle of forex

  • the money jar trap

  • the new world currency

  • the opportunity in exporting

  • the seven most traded currencies in forex

  • the top four forex brokers

  • the uses in forex trading of moving averages and macd

  • three important forex concepts for new traders

  • three reasons to start derivatives trading

  • three reasons why forex trading is great

  • top 10 scams

  • to be or not to be a psychological currency trader

  • trading analysis the big mac

  • trading currency through online forex brokers

  • trading forex to advance your financial position

  • trading profitably on the foreign exchange market

  • trends and profitable trading in the forex markets

  • trying forex trading with the best strategy and approach

  • two great advantages of forex trading

  • two great forex indicators bollinger bands and fibonacci retracements

  • two reasons why many people participate in forex trading

  • welcome to the world of forex trading

  • whats fibonacci forex trading

  • whats the 382 fibonacci ratio in forex trading

  • whats the difference of trading mini lots vs full sized lots in forex

  • whats the fuzz about e currency trading

  • what is a forex broker

  • what is a forex market maker

  • what is forex

  • what is forex trading

  • what is rollover interest in the forex market

  • when is the best time to take your company public

  • wheres the money

  • where to get forex training

  • why demo fx account performance is often better than real account performance

  • why is it more profitable for an indian to take up work at home business

  • will a falling dollar derail your plans for retirement

  • word of mouth marketing examples part three

  • work from home with e currency

  • yes you can start trading forex for free

  • your guide to learning a forex trading system

  • your guide to successful forex trading

  • your mother could make money in forex trading