Though Forex trading is about earning the real money, sometimes new Singapore Forex traders forget about the existence of a demo trading account and rush forward to trade for real money without any decent practicing on demo. Don’t underestimate demo trading as this is the place where traders may sharp their Forex trading skills and learn how to avoid most of their trading mistakes.
Once you muster Forex trading and start making constant profit on your demo account this is the time to move to the real trading mode. This is a crucial point for the majority of Forex Singapore traders. As demo and real trading seem to be so similar practically it is not always like that. There are few aspects of their difference that we would like to cover in this article. The main differences and difficulties that traders must consider when moving from demo to real Forex trading are technical and psychological issues.
The technical issue really depends on the Singapore Forex broker you are trading with. If you are trading with a market maker broker, so you can be sure that the demo and real trading systems are totally different. In a demo account all transactions are automatic and computerized with quick and precise order execution. As for a real account, so here the market maker brokers execute all trading orders via the dealing room.
The real trading system is not fully computerized, as the real people watch and manage the trading execution of the traders. A dealer executes the trades according to the interest of a broker and sometimes it may take a minute or so to make your order done. As a result it causes slippage and your trade can be opened or closed for a rate different from the one you asked for. So if on a demo account your trading execution was smooth in real account of a market maker broker you may see many gaps between the rate you placed the order for and its real execution that may cause you tens pips of profit.
ECN and STP types of Forex brokers have more sophisticated and computerized systems that allow them to guarantee the precise execution of the orders. STP and ECN Singapore brokers don’t have an interest to manipulate the rates as their main income is mostly from the spread of the traders not their losses as it often happens with the market maker brokers. ECN and STP trading systems use the matching technology that automatically unites the opposite transactions of the traders either inside or outside the broker’s database. This trading approach guarantees the traders the security of the trades’ execution and almost has no technical gaps between demo and real trading.
The psychological difference between demo and real trading has nothing to do with the type of broker or a trading platform you are trading with. It depends purely on the personality of a trader and general human psychology. When trading on a demo account you don’t have much concern about loosing your demo money thus the factors of wariness and fear are not present in demo trading.
When trading on demo a trader feels free, relaxed and excited. The real trading makes us feel much more different. If you have invested your hard earned savings you are under the pressure and very careful about not to loose the funds. Before every real trade execution a trader overcomes many doubts and fearful thoughts. This is a psychological barrier that makes you trade differently in the real account and often is the reason of many mistakes that you would never do in demo trading.