Lesson #2 – Why i need to start with a demo account even if demo is not live￼
We see a lot of comments about Live and Demo account.
Being a beginner, a demo account is the best way to start. No doubt.
Before to go live, you will need to repeat your trading plan, be sure that you are computing right the lot size, entering at the good moment and exiting right.
The money management needs to be perfectly understood: you need to survive first.
No matter that Live account will be different – it will be -, it’s only a training.
If you don’t make virtual money with a demo account. it means that you won’t gain any money with a live account because it will be harder there.
We will define what is a trading plan later.
For the moment we just focus on differences between demo and live account.
demo account is a technical playground where your order is always filled right at the good prices you asked for. The orders don’t go out the box of your broker and its tools. There is no link with the external world. it’s like a simulator for the pilot.
A Pilot using a simulator knows that he won’t die if the plane crash. It’s the same with a demo account.
No pilot will begin to fly without spending hours and hours, days and months in a simulator before to fly a real plane even empty of its passengers.
Why . then, a beginner trader needs to go live quickly?
No reason. Only good reason for the broker to push you to lose all your money quickly (see A Book and B-Book after)
There is different type of live account :
There is “the real” live account where the order you are making is sent to the inter-bank market thanks to the liquidity provider of your broker. Your losses are real, the exposure of the broker is real too. It’s “A-book”.
There is the “fake real account” called “b-book” where your order, like for the demo, stay in the technical black box of your broker. All the game of the broker will then to let you see looses while finally, they are not sending any orders to the real market. Don’t cry, it’s perfectly legal.
And there is “Mix real account” or “hybrid” where a part of your trade is sent to the market and the other part no.
All little account with low deposit under 1’000 USD have a great chance to be placed in b-book directly because we know that a beginner with less than 1’000 USD on his account has no chance to win something. It must be close to 99% of failure at 6 months.
% of winning account begin to higher than 40-50 % for biggest account around 10’000 USD, 20’000 USD where the risk for the broker to have to give back real money to a winning client is too high – for a broker who plays the game fully then there is big chance that the account will be in a-book or hybrid model.
In our day(s) the number of brokers using only b-book is decreasing and more and more broker are using only A-book or a light hybrid.
There is still “pure b-book” players but the game for them is becoming harder because “the spread war” between brokers decreased the cost to enter a trade dramatically and then with low spread they need to be careful about winning client but there is still business to do at this level.
Binary options are ALL b-book. They never send any order to the market, no matter of the deposit you have because there is no “technical way” for them to do it with the promise of gain they make you. Statistically, we know that all binary options client lose. There is an extreme minority who can gain some money “sometimes” but it’s really a very little part.
Then my ONLY advice is TO NEVER play binary options or try to make “a coup” and stop. (one or 2 trades) gain money and ask for a withdrawal, that’s all
In any case, no serious trading plan will fit with binary options which are only done to trap beginners with false gain promise.
Then my advices for today are :
Rules #4 – Start with a demo account until you begin to gain money with it and keep this gain at least for 2 or 3 months. Setup the demo account with the amount you will play live. Avoid brokers which don’t allow that and give you a lot of virtual money.
Rules #5 – NEVER PLAY BINARY OPTIONS which is only a trap for naive people
Rules #6 – Even live could be like the demo then your live deposit needs to as high it can be to be placed directly in the A-BOOK “zone”. Indeed in B-Book brokers will push you to make errors with their “gentle agent” at phone then starting with a deposit of 10’000 USD is the good sum.