Why Forex Traders Trade Better on A Demo Account Than Live

If you are looking for reasons why forex traders trade better on a demo account than live, then you are not alone.

Chances are you recently lost a couple of trades after moving from a demo account to a live account. So, you are wondering why you trade better on a demo account.

Indeed, many Forex traders do not perform well after moving to a live account. Some even go ahead to lose for a prolonged period before landing their first win. Others who are lucky enough to land a first huge win blow it up in their next few trades.

All these are going to be discussed in this article. Also, each statement is going to be backed up with solid facts. So, brace up and ensure you don’t go anywhere.

Reasons Why Forex Traders Perform Better on A Demo Account Than A Live Account

Drafted below are some well-researched reasons to prove that most Forex traders are less effective on a live account than on a demo account. These reasons are just six in number and we tried our best to ensure an unbiased presentation.

It should also be noted that the fourth reason is a bit controversial. This is because we thought this would provide a more realistic response from one Forex trader to another. So here we go:

1. Trading for A Short Time With A Demo Account

Forex Traders Trade Better on a Demo Account Because They Do mot spend enough time on the charts
Forex Traders spend less time on demo accounts

Generally, there is no particular duration in which a Forex trader should use a demo account. It depends on each person as it may take longer for some traders to master the basics and shorter for others.

A demo account should be used for learning the basic workings of the Forex market. How to place an order, how to manage an open position, the mechanics of your chosen broker, which strategy to adopt, and all whatnot.

However, it becomes a problem when traders rush into a live account without letting this process sink in. Some do this because they were lucky enough to win their first set of trades on a demo account. Others do it because they didn’t experience any loss during their short period of demo trading. So these traders enter the market without knowing how to handle losing streaks.

Also, jumping right into a live trading account after a few demo wins only shows how incapable you are of controlling your emotions. It is ok to get excited after a successful trade but don’t be arrogant. You have not learned anything yet. All you’ve learned is the feeling of winning a lottery.

We can tell you this, as a beginner, there is always a mistake to learn from every Forex trade. This holds true for even professionals who switch to a new strategy.

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So, take the time to analyze each trade to understand why you won or why you lost.

2. Lack of Fear When Using Demo Accounts

Forex Traders trade better on a demo account because of Lack of Fear when using demo accounts
Forex Traders Lack Fear when Using Demo Accounts

This is another good reason why you trade better on a demo account. As opposed to a practice account, you are putting your hard-earned money on the line when live trading. So, there is very little pressure of not blowing up your Forex account or meeting your monetary needs. When demo trading, it is very easy to follow a trading plan without deviating from it.

You are not bothered by the FOMO factor. FOMO simply means the fear of missing out on potential wins. It makes Forex traders rush into trades without analyzing adequately. This factor has a very loose hold on traders who operate on demos because there is practically nothing to lose out on.

Then, there is also the Fear of Getting In. This factor can lead to too much analysis of a particular position due to a lack of confidence in one’s trading skills. It is more like fearing to lose money even after performing proper analysis and backtesting. As a human trader, it is okay to feel afraid when trading on a live account. After all, it is your real money on the line and we are not talking about pennies on a dollar. What you should be afraid of is letting this fear control your decision-making.

3. Lack of Commitment and Emotions

Forex Traders trade better on a demo account than live
Lack of Emotions while using a demo account helps forex traders trade better

This is perhaps a more generic way of explaining the point mentioned above. Fear is only a part of the reasons why you don’t trade well on a live account. It is a subset of various other emotions and it plays a major role in determining the success of every Forex trader. Other constricting emotions include greed, regret, rage, stress, and even overconfidence.

All these emotions play a very little role when trading with a demo account. Well, maybe not the aspect of being overconfident. This is because gaining confidence is part of the purpose of a demo account.

As opposed to a live trading account, you do not feel the need to avenge the Forex market. You have the luxury of caring less no matter how much you lose.

You can see the problem, right? It is the same reason why you perform excellently during rehearsals but start to falter when the main event comes up. This is quite similar to traders who expect to trade well on a live account just because they performed excellently on a demo account

Also, trading with real money can make you a bit greedy. There is always this tendency to see a winning potential in every strategy even when it is faulty. There is also an ever-present urge to not close a trade that has won you some money. This is your emotions speaking and should therefore be silenced at all costs.

The goal is to turn out successful after a series of trades, it is not to make one huge win and return to default.

4. Processing Speed and Slippage

Now, this is a more technical reason why forex traders trade better on a demo account than Live.

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It is a bit cynical as well, and it attempts to answer a very controversial question. And hey, it’s completely ok to disagree with some of the points, but what is not ok is trying to resist the obvious.

So, what is slippage? Slippage occurs when you want to order a currency pair and it ends up being filed at a different price than originally indicated.

It can either go in your favor or against you—depending on whether you bought or sold that pair. Also, a technical theory holds that slippage occurs as a result of increased volatility in the Forex market.

This is a fact because the more volatile the market becomes, the more prices fluctuate and the more slippage happens.

Hence traders experience a decrease in the processing speed of executing orders. Therefore, when slippage goes against you, it will negatively affect the profits on your live account. One way to prevent this is to avoid the market at potentially volatile periods.

In addition

Some Forex brokers can deliberately remove this shortcoming from their demo accounts. They may do this to give newbies a false sense of a perfect market. This claim has of course been proven through the various lawsuits filed against a few brokers.

Remember that your Forex broker is a counterparty to your every trading endeavor. That is when they offer fixed spreads and act as Market Makers.

This means that in a live trading account, any win you make is a loss for your broker, and any loss is a win for them. For example, when you buy a GBP/USD pair, your broker gives you the pound currency and takes your US dollars.

In a case where your trade turns out successful, they lose a few dollars. But when it turns out unsuccessful, they make a few dollars.

So, when advancing from their demo account to their live trading account, you are left unexposed to this reality of the market. You become shocked and frustrated each time slippage occurs.

This is common for short-time demo traders and it shows the extent to which some brokers can go to maximize profits.

A good way to avoid this is by checking if your broker is registered with a reputable financial body. Quickly scan through this article to learn more about choosing a good Forex broker.

5. Spreads

Spread in Forex is the difference between the rate you can sell a base currency and the rate at which you can buy at a given time in the market.

The selling rate is called the bid price while the buy rate is called the ask price.

This difference is one of the ways Forex brokers make their money. It is more like a transaction cost or a commission on each transaction.

How do spreads prevent Forex traders from trading well on a live account?

It does so because their ask price rate is always slightly higher than the bid rate. Let us look at a simple example.

You are looking to buy the EUR/USD currency pair with a bid/ask price of 1.0930/1.0932. This simply means that you can sell the 1 euro to your broker in exchange for 1.0930 dollars. Or you can buy 1.0932 dollars for 1 euro. Each time you transact at this price quote, your Forex broker should be expecting a gain rate of 0.0002 dollars or 2 pips.

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So you see the difference. If you bought this pair and the market went in your favor, you will first have to cover up for the 2 pips lag before you can make any real profit.

This is why it is not good to set your take profit order too tight above the asking price. Even when the price goes in your favor, you could end up with a red outcome. This is because that little money you gain will be negated due to increased spread.

The bid/ask spread problem is one of the reasons traders lose money while trading on a live account. This rarely happens on a Forex demo account because most brokers do not alter their quote prices as they do on live accounts. Also, some of them intentionally set unrealistic spreads to make your demo trading appear pleasant.

6. Your Forex Broker

This is merely a repetition of point number 4 and 5 but in a more direct way. Some Forex brokers to a certain degree, combine slippage, processing speed, and spreads to maximize gains. They go as far as altering the price orders of traders on a live account. Some may even intentionally delay processing speeds in a split second and blame it on technical faults.

We can tell you as experienced Forex traders that a lot can happen in as little as 0.1 seconds. So even after using a demo account, don’t jump immediately to a live account. Perform adequate research on whichever broker you want to trade with. Check their ratings on Trustpilot as well as their customer reviews. You can also check their authenticity with any financial regulatory body.

Frequently Asked Questions About Performing Better On Demo Accounts Than On Live Accounts

How Long Should I Trade Demo?

There is no specific amount of time to trade a demo account. The major aim of demo trading is to master the basics of Forex and other critical aspects of trading such as Risk Management and developing your strategy.

Are Forex Demo Accounts Rigged?

As long as you are trading with a verified Forex broker, demo accounts are not rigged. One of the reasons for this perception is that many traders do not trade as well in a live account as they do on a demo account. This failure is mainly because of the inability of traders to properly control their emotions.


The purpose of this article has been to shed as much light as we can on the reasons why many Forex traders trade better on a demo account than a live one. We also took the time to add some tips on how you can improve your trading on a live Forex account.


Many of the points stated here are from both personal opinions and adequate research. Is it possible that our own bias might have gotten in the way at some point? Yes, it is. This is part of the features of almost every writeup.


What is backtesting— ig.com

Keeping confidence in check— Babypips

Forex manipulation claims— giambronelaw.com

Counterparty definition— forex.com

Tips for selecting a broker— Investopedia

Bid price definition— Wikipedia

Ask price definition— Wikipedia

Trust pilot website— trustpilot.com