Why Demo Accounts Don’t Reflect Actual Trading Conditions?
To get the answer for this question that why demo accounts don’t reflect actual trading conditions, one should be well aware of what these demo account are and what is their significance in forex trading. A demo account is taken as a mock-up of a trading account, usually with a huge sum of virtual money, that traders can use to examine the trading platform and check whether or not they are trading at ease under the broker's conditions prior to making any real money investments. These demo accounts can be highly complicated sometimes, presenting the real-time market fluctuations with a single tick, and therefore permitting the traders to evaluate exactly the conditions they would be dealing with while investing any real amounts of money.
No matter how realistic trading with a demo account may seem, and hence demo accounts cannot reveal the real trading conditions that traders face while risking their real money during the trade. In real world trading the two factors emotion and psychology plays a vital role in a real market situation, which makes it intricate for investors to make an intent decision regarding opening and closing of the trade in order to get maximize profit and minimize loss. Many expert traders know this and forge their strategy to specifically earn from newbie’s' mistakes.
There are few other reasons why demo accounts don’t reflect actual trading conditions: for instance a usual demo account takes very lofty initial deposit as the beginning investment, around $100,000, which in turn lowers the risk of a serious drawdown and margin calls, giving the new traders a notion that they don’t need to worry about these essential factors, particularly when initializing with a low capital like most novice traders do.
But the demo accounts can be made to offer more of realistic situations by just keeping into consideration few factors for an instance, if an offer (bid) is placed and you can see that the bid or offer was not as per that particular move, and your order was not filled due to a minor difference. But the demo trading account might present this order as filled, whereas in the real market, this won’t happen. Also it should be tried to trade the same amount of funds in the demo account as will be traded in the live market. If the demo does not allow this, trade only a fraction of the demo account capital.