How long to trade on a demo account?

The difference between trading on a virtual and real account is a topic that generates a lot of discussion among traders at all levels of experience. For beginner traders, virtual (demo) trading is a safe way to learn the trading platform, try out trading, and practice spotting trading opportunities. More experienced traders, on the other hand, use the demo as a complement to a real account to try out new strategies and approaches or tools.

Unfortunately, unlike real trading, demo trading cannot simulate the psychological challenges that are so typical of real money trading. Thus, the fear of losing equity or the euphoria of potential profits and many other psychological aspects that have a huge impact on trading results remain a big unknown for "demo traders".

The transition from demo to real money trading is a crucial milestone in any trader's trading career. However, it is also important to note that the psychology of trading differs significantly in these two modes. Let's show you how.

Benefits of trading on a demo account

Virtual trading is an ideal starting point for all newcomers who are fascinated by the trading world. Thanks to it, it is possible to get acquainted with the platform (most often MetaTrader 4 or cTrader), get familiar with charts, follow the price development over time, gradually start trying to analyze the market, interpret individual indicators, and test your own strategies. Thanks to this, a beginner can understand how the markets work without losing a single penny.

However, as the basic lesson of toxicology goes - the difference between a drug and a poison is the dose - and so at a certain point, the imaginary line between a good educational tool and a potential source of bad trading habits starts to blur with a demo account. We'll explain why below.

Disadvantages of trading on a demo account

Ironically, one of the main problems that a demo account brings with it is rooted in its biggest advantage - the safety of trading with virtual money.

Demo account traders can try their best to imagine virtual money as real money, but it will always be an imperfect illusion. This delusion then leads traders to underdevelop their decision-making process - a characteristic that is absolutely crucial for trading in real markets.

By doing this, demo traders unknowingly form very harmful trading habits which, when combined with emotional pressure, will show up in the live account itself. The consequence can be, for example, excessive risk-taking, neglect of money management, or, on the contrary, paralysis due to fear of losing one's own money.

In addition, the aforementioned fear of potential losses and pressure to make a profit can also significantly influence the trading decisions of many demo traders, which often leads to mistakes such as prematurely closing positions or excessive risk-taking, moving stop losses and disproportionately increasing losing positions.

For this reason, it is important to be wary, as staying too long in a demo account can lead to several major limitations that can affect a trader's ability to achieve real results in the live market.

Some of the bad habits you can form by trading on a demo account include:

1. A false sense of security
   The risk-free environment of a demo account often leads to overconfidence and a feeling that trading is easier than it is. The encounters with reality after switching to a real account are then quite brutal for traders and often lead to wrong decisions and excessive losses.

2. Lack of emotional involvemenManaging your own emotions and trading according to a plan play a key role in trading. When you trade with virtual money and you are not at risk of actual loss or promise of a profit, you have no chance to simulate the situations that you would get into when trading in a real account. You cannot know how mentally prepared you are for real trading.

3. Unrealistic expectations of the markets
   While a trade you place on a demo account will always be processed by the platform as you expect, this may not be the case on a live account. Due to slippage and lower liquidity, in real trading, your trade may not be opened or closed at the same price you were expecting. This is something you will not encounter on the demo and therefore will not learn to deal with.

4. Stagnation in learning and self-developmentWhile demo accounts are great for basic learning how to navigate the platform and how to read charts, including strategy testing, there is one problem. Namely, that after a certain short period, you won't learn anything new. Respectively, you can learn about individual indicators, fundamentals, or technical strategy setups all the time, but real trading experience and skills, including risk and emotion management, are best gained through interaction with real market conditions.

Achieving success on demo accounts without the risk of loss can lead to the adoption of inefficient and risky trading decisions as well as the creation of strategies that would not be sustainable in the real world.

How to switch from a demo to a real account?

If you want to switch from a demo account to a real account as smoothly as possible, it is important to follow strict money management and risk management right from the start. You need to remember that success in a demo account means essentially nothing and certainly don't expect the same results from real trading. At least not immediately. In short, traders should work on building a realistic view of trading that takes into account potential losses.

At the same time, you should be open to education in trading psychology and self-knowledge. Recognizing your emotional reactions to profits and losses and understanding how they affect you when making decisions can help you significantly improve your trading results. For example, a significant number of traders are dedicated to various stress management techniques such as meditation, consulting a trading coach or exercising, and finding a balance between trading and personal life.

How long to trade on a demo account?

Here the answer is very individual. It depends on the time possibilities of each individual, and how much time per day, week, or month can be devoted to trading. Furthermore, the willingness to learn on the run is also a significant factor. For example, switching to trading on a real account with less capital and smaller lots after a few dozen hours of testing on a demo account can start getting you used to real market conditions in no time.

In general, it is recommended not to spend more than a couple of weeks in demo trading, as after about a month of regular testing, trading habits start to form, which can often be bad given the context of virtual money trading we’ve been writing about. In the past, it has often been argued that there is also a so-called 21-day rule, where as part of habit formation, automatic habits can often be formed after this time in activities that we normally do

While this has been debunked as a myth, it is still important to be wary of mentally attaching ourselves to virtual trading that is different from the real thing.

Conclusion

To summarize, the main factors to successfully transition from virtual to real trading are setting realistic expectations, firm discipline, and continuous education in the psychology of trading. In this way, traders can better manage the emotional challenges associated with real trading and increase their chances of success in the markets.

Traders need to consider demo trading as an initial step in their learning process, not as an end goal. The transition to a real account should be made as soon as the trader has sufficient knowledge and is psychologically prepared for the challenges of real trading, and it does not matter at all if the trader gradually starts with less capital and volume in the micro lots, as this will minimize the risk and allow him/her to start gaining valuable experience.

With that said, fingers crossed for your smooth transition to a real account!