How to use a demo account so it actually helps

Everyone is told to run a demo first. Very few are told how to run one usefully — and a demo used
badly builds habits that are hard to shed.

1. What a demo does teach

• Platform mechanics — placing orders, moving stops, reading contract
  specifications, exporting reports. Learning this with real money is a waste.
• Testing your entry rules — whether your
  strategy actually produces signals, and how many a week.
• The journalling habit — much easier to form
  before money is at stake.

2. What it does not teach

• Psychology. This is the crux. Holding losers,
  cutting winners short, taking revenge on the market — none of it
  appears when the money is not real.
• Real execution. Demo servers usually fill more kindly: less slippage, no requotes,
  steadier spreads than reality.
• Discipline through a losing run. On demo, five losses in a row is a line of
  numbers. On a live account, it is the thing that makes people abandon the plan.

3. The biggest mistake: setting the demo balance too high

Demos usually default to $100,000. If you intend to fund with $1,000, running a $100,000 demo means
you are practising a different sport. Position size, the feel of the risk and how you
handle drawdown are all completely different.

Set the demo balance to exactly the amount you intend to deposit. Most brokers let
you choose the balance when opening a demo.

4. A four-week demo routine that is worth something

• Week 1 — mechanics only. Open, close, modify, place pending orders, read the
  specifications. Ignore profit and loss entirely.
• Week 2 — write your entry rules on paper, trade only those rules, and record every
  trade.
• Week 3 — apply real money management: 1%
  per trade, position size by formula.
• Week 4 — repeat week 3 exactly, then review the journal: did you break a rule, and
  in what situation?

5. When to move to real money

Not when the demo is profitable, but when you have followed the process for at least 30
consecutive trades — losers included. Consistency is what transfers to a live account; demo
results do not.

6. A sensible way to make the jump

Do not go straight from a $5,000 demo to a $5,000 live account. The sensible intermediate step is a
cent account or a live account with a small balance: the money is real so the
psychology is real, but the cost of the learning phase stays within what you can absorb.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.