In recent years, the popularity of online currency trading has grown substantially. Every day, online brokerage firms attract new investors FX - each lined with a twinkle in his eyes, lured by promises of easy money. Most of these companies allow you to register for a free demo account that allows you to place trades using their simulation trading platform to get an idea of the excitement of currency trading. In the informal world of free demo accounts - many young traders find they are able to reap impressive benefits without a significant amount of effort. It almost seems too good to be true. However, transferring this success from a demo account real account is far less common. Why is this? The actual trading platform behaves the same way, the market does not care if you're a demo or real trader - What has changed? It is you who has changed. Not your personality, not even your trading style - but the factors affecting it are different.
What is the key factor for business success?
The search for the "Holy Grail" of trading has been a common theme throughout the history of the markets. A variety of different techniques. Those who are inclined towards number crunching and pattern recognition prefer technical analysis, while 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, such as Elliot wave theory. What is the best? There are examples of very successful traders using each methodology.
Like most new traders lose money - perhaps the more appropriate question to ask is, "What is the key factor for the failure of trade?"
Greed and fear
Trade is an atmosphere rich in porous emotions of greed and fear. The current price of a particular security or financial instrument at any moment can be considered as a confluence of greed (bulls) and fear (bears). These two emotions are the core of humanity itself. When released market information, trade can be a high intensity. Sensing danger, your body releases adrenaline which acts to accentuate both his greed (fight) and fear (flight). Because these emotions are so strong they can cause to act irrationally, ignore the system, said set of rules or trading plan and act on their impulses. In fact, this is a genetically programmed response - but it is often also the collapse of the merchants, especially when he is playing much better capitalized, more sophisticated enemies and experienced know how to manipulate emotions.
When you are a trader - you're always under the influence of at least one of these two emotions, even if it has operations.
Impact of fear and greed in trading
If the market goes up and you are in - greed is telling you to buy more and fear is telling you to take your profits while you still can. If you are going down, fear of being wrong makes you hold onto a losing position - and then greed sometimes convinces "average down" position (and buy more) so it will be easier for you to return.
If the market goes up and you're not invested - fear is telling you that losing money is easy, but it is greed that makes him come in just after the greatest increase (just when its about to reverse the course). If the market goes down and you're not invested - greed is telling you to go because the price is cheap, while fear reminds you that you will lose this opportunity if we do not act quickly.
Maybe if we feel like greed, or just feel the fear that they would be able to control our emotions a little better. But when these two little devils whispering in our ears at the same time - it is often impossible not to hear.
The emotion of greed
The first time you try FX trading - will feel the emotion of greed. It is an ecstatic experience, your brain neurotransmitters and flush your mind giddy with visions of untold riches about to be harvested. Greed is bold, aggressive and incredibly exciting. It may take hold of you, both mentally and physically. Imagine the possibilities!
This greed that leads to currency trading in the first place - the dream of easy money and 100:1 or 200:1 margin rates. It inspires us and leads us to abandon rational thought in favor of a reckless abandon. In the movie Wall Street, Gordon Gecko says: "Greed is good", but also very dangerous - especially if you are unable to recognize when greed is the speaker. Greed is also one of the techniques used to manipulate people. Each scheme to get rich quick, with the promise of untold riches without payment takes advantage of his natural disposition to throw all logic and sense out the window when greed pays a visit. The argument starts to appear very convincing and ignore what would otherwise be clear warning signs. Like drunk goggles, greed can mislead and when they finally wake up, are often in a very precarious situation.
The fear of losing
Fear can be so dangerous. The most powerful and easy to handle fear is the fear of admitting they are wrong. Fear of having your precious ego bruised. This fear can make people do incredibly stupid things. The funny thing about this world is that everyone thinks they're right. Most people would rather lose thousands of dollars to admit they are wrong. It's easy to feel ashamed of trading losses and live in denial, but this is self-destructive behavior. By denying the existence of the problem, you can not take measures to address and ensure that only continue in the future.
Trade Show
Demo trading is a good way to get started in currency trading. It is identical to the actual negotiation, and you're using "pretend" money. Operations demo will give an idea of what kind of market moving events and how they move. You are encouraged to learn more about geopolitics, macroeconomics and finance and all these things are very positive.
Operations show also introduces you to the ecstasy of greed. Trade is a means of one of the most pure, raw and powerful forms of greed. The point of negotiation is to make money and more money you make - becomes the stronger the force of greed. It is intoxicating and can take complete control of you. But demo trading does not feed the fear. There is no fear when you are trading demo. It's like having a perpetual card to get out of jail free. If you start losing badly on a demo account - simply start a new one. There is no accountability for their business failures and only recognition of its commercial success.
As your demo account does not teach you how to handle the emotion of fear. This emotion is most likely going to lead to his downfall. Greed can get overextended, but fear prevented him from cutting their losses. You may think that the fear of losing the money you would cut your losses, but the strongest emotion is fear of being wrong and makes you hold on to your losing position - until everything is gone.
There is also the question of the size of the account. Many demo accounts will give $ 50,000 to play. This type of capitalization allows you to buy 5 lots (500K) of EURUSD quite easily. If it goes up 20 pips you've made $ 1000. Bonito. But when you open your real account - it's more likely that you put $ 5000 or $ 10000 in it to begin with. Now you're dealing with a lot of 50K, which means to make $ 100 a movement of 20 pips. But mentally they are accustomed to receiving $ 1000 for the movement so they usually end up risking more. Next thing we know - your 200K position has turned against you 50 pips and lost $ 1000. That's real money you just lost. You can not just start another account.
The capitalization of the demo account is enough to keep the losses and still come out on top. But his real account is likely to be undercapitalized and if you are trying to obtain yields similar to what you have in your demo account - it's going to explode soon.
Be honest with yourself
Ultimately, while providing an excellent introduction to FX trading - demo accounts do not accurately predict if you real money trading success. The markets are dominated by psychology, and often go against what fundamental logic or technical indicators suggest that it should happen. The most critical factor in business success is your ability to control their emotions of greed and fear. These emotions cloud your view and make trade recklessly. Demo accounts submitted to the emotion of greed, but by their very nature, are risk free and therefore there is no fear involved. It is also likely to be better capitalized than their real money account, which misleads you with respect to the number of statements that can win.
For all these reasons, demo accounts allow you to avoid being honest with yourself and this is perhaps the most important of all. You need to know your limits and knowledge and to know these - you have to be honest with yourself.
That said, demo accounts are still very entertaining and educational and I highly recommend opening one to anyone interested in obtaining a sample of the exciting world of forex trading. It's a good way to learn more about the economy, global politics and yourself.
What is the key factor for business success?
The search for the "Holy Grail" of trading has been a common theme throughout the history of the markets. A variety of different techniques. Those who are inclined towards number crunching and pattern recognition prefer technical analysis, while 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, such as Elliot wave theory. What is the best? There are examples of very successful traders using each methodology.
Like most new traders lose money - perhaps the more appropriate question to ask is, "What is the key factor for the failure of trade?"
Greed and fear
Trade is an atmosphere rich in porous emotions of greed and fear. The current price of a particular security or financial instrument at any moment can be considered as a confluence of greed (bulls) and fear (bears). These two emotions are the core of humanity itself. When released market information, trade can be a high intensity. Sensing danger, your body releases adrenaline which acts to accentuate both his greed (fight) and fear (flight). Because these emotions are so strong they can cause to act irrationally, ignore the system, said set of rules or trading plan and act on their impulses. In fact, this is a genetically programmed response - but it is often also the collapse of the merchants, especially when he is playing much better capitalized, more sophisticated enemies and experienced know how to manipulate emotions.
When you are a trader - you're always under the influence of at least one of these two emotions, even if it has operations.
Impact of fear and greed in trading
If the market goes up and you are in - greed is telling you to buy more and fear is telling you to take your profits while you still can. If you are going down, fear of being wrong makes you hold onto a losing position - and then greed sometimes convinces "average down" position (and buy more) so it will be easier for you to return.
If the market goes up and you're not invested - fear is telling you that losing money is easy, but it is greed that makes him come in just after the greatest increase (just when its about to reverse the course). If the market goes down and you're not invested - greed is telling you to go because the price is cheap, while fear reminds you that you will lose this opportunity if we do not act quickly.
Maybe if we feel like greed, or just feel the fear that they would be able to control our emotions a little better. But when these two little devils whispering in our ears at the same time - it is often impossible not to hear.
The emotion of greed
The first time you try FX trading - will feel the emotion of greed. It is an ecstatic experience, your brain neurotransmitters and flush your mind giddy with visions of untold riches about to be harvested. Greed is bold, aggressive and incredibly exciting. It may take hold of you, both mentally and physically. Imagine the possibilities!
This greed that leads to currency trading in the first place - the dream of easy money and 100:1 or 200:1 margin rates. It inspires us and leads us to abandon rational thought in favor of a reckless abandon. In the movie Wall Street, Gordon Gecko says: "Greed is good", but also very dangerous - especially if you are unable to recognize when greed is the speaker. Greed is also one of the techniques used to manipulate people. Each scheme to get rich quick, with the promise of untold riches without payment takes advantage of his natural disposition to throw all logic and sense out the window when greed pays a visit. The argument starts to appear very convincing and ignore what would otherwise be clear warning signs. Like drunk goggles, greed can mislead and when they finally wake up, are often in a very precarious situation.
The fear of losing
Fear can be so dangerous. The most powerful and easy to handle fear is the fear of admitting they are wrong. Fear of having your precious ego bruised. This fear can make people do incredibly stupid things. The funny thing about this world is that everyone thinks they're right. Most people would rather lose thousands of dollars to admit they are wrong. It's easy to feel ashamed of trading losses and live in denial, but this is self-destructive behavior. By denying the existence of the problem, you can not take measures to address and ensure that only continue in the future.
Trade Show
Demo trading is a good way to get started in currency trading. It is identical to the actual negotiation, and you're using "pretend" money. Operations demo will give an idea of what kind of market moving events and how they move. You are encouraged to learn more about geopolitics, macroeconomics and finance and all these things are very positive.
Operations show also introduces you to the ecstasy of greed. Trade is a means of one of the most pure, raw and powerful forms of greed. The point of negotiation is to make money and more money you make - becomes the stronger the force of greed. It is intoxicating and can take complete control of you. But demo trading does not feed the fear. There is no fear when you are trading demo. It's like having a perpetual card to get out of jail free. If you start losing badly on a demo account - simply start a new one. There is no accountability for their business failures and only recognition of its commercial success.
As your demo account does not teach you how to handle the emotion of fear. This emotion is most likely going to lead to his downfall. Greed can get overextended, but fear prevented him from cutting their losses. You may think that the fear of losing the money you would cut your losses, but the strongest emotion is fear of being wrong and makes you hold on to your losing position - until everything is gone.
There is also the question of the size of the account. Many demo accounts will give $ 50,000 to play. This type of capitalization allows you to buy 5 lots (500K) of EURUSD quite easily. If it goes up 20 pips you've made $ 1000. Bonito. But when you open your real account - it's more likely that you put $ 5000 or $ 10000 in it to begin with. Now you're dealing with a lot of 50K, which means to make $ 100 a movement of 20 pips. But mentally they are accustomed to receiving $ 1000 for the movement so they usually end up risking more. Next thing we know - your 200K position has turned against you 50 pips and lost $ 1000. That's real money you just lost. You can not just start another account.
The capitalization of the demo account is enough to keep the losses and still come out on top. But his real account is likely to be undercapitalized and if you are trying to obtain yields similar to what you have in your demo account - it's going to explode soon.
Be honest with yourself
Ultimately, while providing an excellent introduction to FX trading - demo accounts do not accurately predict if you real money trading success. The markets are dominated by psychology, and often go against what fundamental logic or technical indicators suggest that it should happen. The most critical factor in business success is your ability to control their emotions of greed and fear. These emotions cloud your view and make trade recklessly. Demo accounts submitted to the emotion of greed, but by their very nature, are risk free and therefore there is no fear involved. It is also likely to be better capitalized than their real money account, which misleads you with respect to the number of statements that can win.
For all these reasons, demo accounts allow you to avoid being honest with yourself and this is perhaps the most important of all. You need to know your limits and knowledge and to know these - you have to be honest with yourself.
That said, demo accounts are still very entertaining and educational and I highly recommend opening one to anyone interested in obtaining a sample of the exciting world of forex trading. It's a good way to learn more about the economy, global politics and yourself.
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