Demo trading on a Free Practice Account

I'm New to Trading, Where Do I Start?

Glen is from Menifee

Glen is from Menifee, California. He is in his 50ties and was introduced to Forex trading in his 20s. Back then, he avoided trading because he lacked money and training.Now, 30 years later, he’s back, introducing himself on Babypips.com February 2nd, 2017 this way: “Hello my name is Glen. I was looking for some training and ran across this site on the Internet. I am from Menifee, California and am in my early 50's. I would like to trade in the Forex market. I was exposed to the market in my early 20's but never had enough training and money at the time. I am back to learn and practice in a demo account when I'm ready. I Hope this will change my life for the better.” I like Glenn’s approach. First learn, then practice on a demo account.

With a Forex demo account, it's possible to practice trading with zero risks.
With a Forex demo account, it's possible to practice trading with zero risks.

What’s a Demo Account?

It’s easier to understand what a demo trading account is if we compare it to a flight simulator.Commercial airline pilots use Level D flight simulators when they train to fly aeroplanes. Level D means the highest flight simulator standards. Level A is the lowest standard.It takes about 18 months to become a commercial airline pilot through a Flight Training Organisation and can be done in two ways:All in one time, or in modules.Both involve one month simulator training in 8 different simulators.See: What's Realistic to Expect on Returns? See: About Jonbert DavidsenTim Hibbetts, Naval Aviator, and Airline Pilot explains what happens in the eight simulators:“Airline pilots go through about a month of simulator training before they can fly.”“Each simulator ride is 4 hours long, with a 15-20 minute break in the middle. You're generally with another pilot who is training, as well. So you get half the ride to practice your primary skills and the other half to act as the monitoring pilot, which is another set of required skills.Tim Hibbetts gives an example from a major airline:

The first Two Simulators

“The first two simulators are strictly for systems review and are done in a specific type of simulator that has no video, no motion, just the logic to interpret switch position and flight computer input.It will make sounds and illuminate the right indicators to reinforce systems knowledge.

The next Six Simulators

“The next six simulators are for procedures training. This can be either in the above type of simulator or a full-motion one. You go through checklists and "flows," which are ways we go through the cockpit to set the right switches and buttons for each segment of flight.”The simulator training culminates with a maneuvers check ride + six rides simulating real-world line operations:

The Check Ride

“Once your procedures are solid, you do five maneuvers simulators, which culminates in a maneuvers check ride. This is the real meat of flying the aircraft when things are going well and when things are not going well.”

The last Six rides

“The last six rides are simulating real-world line operations, where you have to work through any problems that arise. The last of these is also a check ride.”All in all, “76 hours of simulator training before you walk aboard the plane and turn left instead of right,” says Tim Hibbetts.

Demo Trading is similar to Demo Flying

Retail Forex traders can use demo trading, when they learn to trade. It took about 18 months to become a commercial airline pilot through a Flight Training Organisation.It’s different for every trader, how long time it takes to become proficient enough to leave the trading simulator and go out and trade with real money.The two ways becoming a commercial airline pilot makes a choice easy.For Glenn, more than two ways of becoming a skillful Retail Forex Trader exist. That makes it a difficult choice.Tim Hibbetts explains how commercial airline pilots use eight different simulators to train their skills.Glenn will just need one simulator.Both the flight simulator and the trading simulator are designed to reflect real-world market conditions.Tim Hibbetts said, airline pilots go through one-month simulator training. Glenn should avoid trading on a demo account just one month. He needs more time.Most like exact numbers, but the best we can say to Glenn and other newcomers is:

It takes several months, perhaps years to learn the necessary skills, and it’s hard to learn.

The length of each trade on the demo account varies. It may take days, weeks or months, depending on the trading style.When Glenn trades on the demo account, he practice his primary skills just as the pilots do.By reading successful traders books and blogs, he practices another important skill set required: The ability to speak and understand the ‘trader language.’

The first Steps in the Demo Trading Account

The pilot's goals using the first simulators were to review the systems and get system knowledge. That’s also what Glenn could do. Since he trades with a demo account, he can press the wrong button without losing money. It’s a secure way to get system knowledge and learn the logic of the trading platform.

The next Steps

Next, he could focus on procedures training as the pilots do. Some traders use checklists. It’s a good approach because it protects against impulsive trading.A good checklist helps to:• Take the right action• In the right order• At the right moment

The Missing Link

The pilot aspirant has flight instructors monitoring if his procedures are solid. But who monitors Glenn, when he trades on the demo platform?Some Retail Forex traders have a trading instructor, most don’t.If Glenn trades alone, he’s responsible for his Psychology, Risk Management, and Trading Strategy. He ‘writes’ his own manual. Therefore we say the missing link.

The Pilot

Psychology, Risk Management and Strategy are well-defined pilot topics. The pilot has procedures and checklists for every detail, and I’m happy for that. I feel safe when entering an aircraft.

The Trader

Glenn, on the other hand, has one option: ‘learning-by-doing,' BUT it’s OK because the penalty is taken away, as he trades on a demo account while he learns.He learns in a risk- and money-free zone.Glenn’s downside, in contrast to the pilots is, he needs to learn without having well-defined goals when he begins. Standardized manuals for procedures, psychology, risk management or strategy aren’t within reach for Glenn.The upside: Glenn knows it’s necessary to fail while improving his trading skills. But he avoids being affected by mistakes because there’s no penalty as long as he stays on the demo account.He can practice proper risk management without being scared losing real money. If Glenn wonders, “How do I manage my capital?” he can practice his money management before he risks real money.

A Question to Consider

While training, Glenn could consider: “What are the differences between demo and live forex trading?” This gave me industry knowledge.

Glenn and The broker

Short after Glenn signs up for a trading account (demo or real) he’ll receive a telephone call from the broker.This is standard procedure.Here are a few tips Glenn can use to help himself when communicating with the broker.The brokers' interest is getting Glenn to deposit money to his account. Glenn, as a new trader, has an interest in learning and practicing on a demo account.He should avoid depositing money.

If he deposits money, he could leave it there without trading it.

Two ways brokers get traders like Glenn to deposit money are:• Closing the demo account after some weeks• Offering bonusHere is what Glenn can do if he experiences his demo account get closed.Send a polite Email to the broker. Ask to get an unlimited demo account. In most cases, this will do. If not, find another broker.Glenn should ask himself these two questions about the bonus:The broker offers me $200 if I deposit $200 - why?The broker offers me FREE money - why?

Answer:

The broker knows chances are almost zero, new traders stand the temptation to trade the money. When they fall for the temptation, they give it all back to the broker. The broker now has the $200 + the deposit.

What Broker should Glenn Choose?

A google-search on How to choose a broker helps Glenn. It gives him an idea, what to consider before signing up with a broker.Signing up with a broker is like opening a NetBank. It’s standard procedure to provide personal papers for proof of identity. This could be electric- water or gas bills, together with a driver license or a passport.

I'm not an affiliate with any broker.

Ask, "What is the human way to deal with people?" it always pays - sometimes sooner, sometimes later, but it always pays. (David J. Schwartz: The Magic of Thinking Big)

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