I am often asked by new traders, “how long should I trade a demo account?”. Which is a great question.
Learning to become familiar with the mechanical process of placing trades within a demo account is essential. The danger in trading a demo account for too long is that it does not develop your emotional resilience. This is key to becoming consistently profitable. I have witnessed firsthand, new traders who become one of the “frozen chosen” soon after opening a live account. Too afraid to place their first trade in a live account for fear of losing money.
In trading a demo account, there are no real consequences for making mistakes, taking excessive risks, gambling, or being too greedy. The ability to reset your account balance with a few clicks negates the need for discipline while in “demo”.
Here is What I Recommend
1. Use a demo account for no more than 3-4 weeks to gain an understanding of the trading platform, placing orders, and closing positions.
2. When you understand how to place trades, open and practice your strategies on a small live account with no more than the broker minimum. As your confidence grows, you can then add funds to your account.
Trade Real Money in a Live Account As Soon As Possible
If your goal is to become a consistently profitable trader, it is in your best interest to trade real money as soon as you are comfortable with placing trades. Although it may feel more comfortable trading your demo account as long as possible, in the long term it may do more harm than good. You are simply practicing a skill in an environment that does not deliver real-world results. And making money with a demo account may give you a false sense of your abilities.
Here’s the reality.
Trading is 80% mindset and 20% skill. Trading a demo does very little to develop your trader mindset. That’s because there is nothing to lose. Your emotions after a losing trade will not be the same as if you had lost real money.
It’s best to use a demo account to help you become familiar with your broker's platform. Transition to a live money account within 3-4 weeks so that you can develop the right mindset. It is only when you are placing trades and risking real money will you be able to discover any limiting beliefs or fears that you need to address.
If you are new to trading, I highly recommend you check out our other posts on investing mistakes and risk management.
Please share this post with anyone who may find it useful.
Trade Demo Account Trade Demo Account Trade Demo Account Trade Demo Account Trade Demo Account Trade Demo Account