Pitfalls While Trading in Real Accounts

Hello, dear readers! In this article, I am going to talk about the differences between trading in a demo account and a real account. I will discuss that problems you can expect to encounter.

A business that is trading in real forex trading account differs from trading in a demo as the sky and the Earth differ despite the fact that a lot of people, especially brokers, say that there is practically no difference. However, it is a pity that a lot of traders going from demo to a real account do not understand that everything in this life is not so simple, and they experience real losses when they were making a “profit” in a demo account. It happens to practically all the traders. Or the robots, for example, Milion Dollar Pips, in demo account showing fabulous profits but works completely different in reality. Why is that so? There are a lot of problems here; however, we are going to discuss the most important ones dividing them into 3 groups as follows:

1. Technical problems

• Note that while trading in a demo account, a computer is processing all of your orders. In a real account, your orders are also processed by computer but is different to the one to which you or a broker can sit at and monitor the situation. Of course, depending on a deposit size (for example, up to $10.000), from their x computer, a broker can also deal with the real account without the account holder being present, but that is going to be slower to process.

There is, therefore, a threat to be faced in the problems given below:

• Slower order processing, for example, you wish to enter a market and a broker cannot open you a position because of one or other reasons with the price that you wish. Or you will leave a position and there will be a gap after a weekend, for example, 180 points, a demo account will close the position where the Stop-Loss was, and a real account will close only when there is the price, because where your Stop-Loss was there was no price.
• A spread increase, especially at night, or during the important news.

Suggestions do not work with strategies which:

• Catch a few points;
• Try to catch sudden movement;
• Trade through important news; or that
• Vary the actual spread size

Your trading strategy has to “remain” all those nuances.

2. Special problems

There are problems created by brokers. Unfortunately, even though there are much fewer problems today, we cannot say that there are none. Some the brokers want to earn additionally commission instead of acting in the trader’s best interests.

That is a separate topic, but one has to say that brokers have statistics showing that 95 % percent of traders lose their deposits, especially newcomers. Therefore, not all brokers derive the positions of traders to a common market and rewind through oneself “on a paper”. Example: a trader deposit is $1000. If a broker derives his positions to a common market; he is going to receive only commissions of, let’s say, $30. However, if he does not withdraw, a novice trader will lose $1000, and all the money will stay at a broker’s side and not $30 but $1000.

There are such brokers, called “Kitchen masters”, who are prone to make scams, help novice traders to burn out their deposits, which manifest in the following cases:

• Slippage – opening the order, not with the given price but 5-10 more points further from the trader’s wished place.
• A non-market quote – that is the price which practically does not exist. For example, a broker sees that, a lot of traders have set Stop-loss at a price level, a broker is not giving not market quotes, if the trader’s Stop-Loss was achieved, the broker takes the money, and the price is coming back to an initial level. It is not difficult to check that by opening the quotations at another broker, and the non-market quote is immediately obvious.
• Open fraud (a history correction, trading without a trader being aware of it, not giving back money, etc.). I have not faced open fraud personally, I have simply read on the Internet that it is common for fraudsters to set themselves up as being brokers with the simple aim of defrauding investors and traders.

Suggestions: Choose a broker with great care. Know that there are no ideal brokers, but there are some bad ones and some very bad ones. Everyone has disadvantages and makes mistakes, some of them more, some of them fewer. Do not choose a small office which is not very well known, especially if it is suggesting you super conditions, specials, various bonuses, etc. Choose the ones that have been in a market for a long time. The basic thing is that a broker gives you back your earned money, and you can get used to any other things. Reade this article “Forex Broker - How to Choose Wisely?“

3. Psychological problems

This is the most important problem. Unfortunately, we create it ourselves. A lot of traders blow away their deposits, not because of the above mentioned technical problems or dishonest brokers, but because of their stupidity, greed, lack of patience, etc. For example, in a demo account when a market is going against you, towards your stop-loss, it is completely the same for you, you do not care about that, do not feel any emotions in comparison with what you are going to feel when your “money” earned in a difficult way is going to burn. You will only have to get used to it.

There is only one suggestion here – do not hurry. Do not trade huge lots. Go with small steps. Begin from small sums, from $100 to $500, from $500 to $1000; do not jump on huge sums of money at once because you will not even be able to look around until you are going to lose them.

Take care and good trading.