Unless you’re some ultra-gifted genius who can predict what will happen in the next two minutes like Nicolas Cage in Next, chances are you first started trading by opening a demo account.
There’s no shame in demo trading – it’s where all the pros first honed and developed their trading skills before making the jump to live trading and raking in mad moolah later in their careers.
The problem though is that many times, after just a few months of demo trading, some traders begin to slack off. They don’t take it seriously and they question why they should even waste their time on demo trading when they can “speed up” the learning curve by going live already.
More often than not, these traders normally blow up their first live trading account. They took the jump too early, and they had not been able to develop the necessary skills, mindset, and discipline that were necessary to become consistently profitable traders.
The truth is that it’s perfectly normal to lose enthusiasm and focus while demo trading. It can be mentally taxing and boring, especially when there’s no carrot at the end of the stick to keep you going.
I understand this problem and that’s why I’ve come up with three exercises to help you take demo trading more seriously.
Feel the Pain
One of the main reasons why some traders decide to move onto live trading is because they no longer “feel the pain” when they take hits on their demo losses.
Many times, these traders feel that they are no longer progressing, as they know that there’s no real money at stake. They don’t take it seriously and end up making poor trading decisions and don’t follow the trading plan, as they know they won’t really get “hurt” even if they lose.
In the long run, this can be very detrimental to one’s development, as it helps develop bad trading habits. To counter this, I suggest putting real-life “penalties” on your trading mistakes.
For example, every time you take a cowboy trade or don’t follow your trading plan, submit yourself to a 90 second plank. Didn’t move your stop loss like you said you would? Clean that stack of dirty dishes! Failed to read up on any news events that came out and got burned for it? You don’t deserve that delicious slice of cake for lunch!
This is very similar to what professional athletes do to push themselves in order to reach the next level. Athletes don’t just show up for gametime. Behind the scenes, Kobe Bryant is running a sprint for each missed free throw. Djokovic is doing 100 pushups for every service error. Lionel Messi runs a mile for every missed penalty kick.
This will help ingrain your mistakes in your mind and help you focus on each and every trade, regardless if its on demo or live.
When you were studying, your final grades were of utmost importance. They would determine whether you would pass the course or not. After all, doctors, lawyers, accountants, and other major professions have their own version of a final exam, so why can’t you also have yours? Why not apply this same concept when you trade forex?
A way to go about this is to treat your demo performance as your final exam. Give yourself criteria upon which to grade yourself and rate yourself at the end of every trading week. For example, you can give yourself a rating of 0 through 10 (0 being the lowest) using the following:
- Adherence to entry rules
- Adherence to exit rules
- Adherence to risk management rules
- Amount of missed trades
- Amount of taken trades
These are just examples though, and you can customize the questions depending on the rules of your trading system.
Join A Forex Trading Contest
And finally, you can make your demo trading career more interesting by joining some of the contests hosted by brokers or even by BabyPips.com. For instance, you can submit possible trades to Forex Ninja’s Trade of the Week. It’s a good way of spicing things up, as winning will get you a badge for everyone to see at the front page of the site.
Of course, when you join these contests, try as much as possible to stick to your original trading style. Remember, demo trading is all about forming the best habits and practices!