Plenty of forex brokers do not only offer demo contests, but heavily promote them. They are an extremely terrible and poor form of marketing and one of the biggest mistakes a new trader can make. They are very popular among new forex traders and the brokers who promote and encourage them exploit one of the biggest hurdles for new traders; insufficent trading capital.
The way most demo contests are arranged s that you register for them and registration is open to everyone. Each registered participant, you are a participant and not a trader if you fall for this marketing gimmick, will receive the same amount of trading capital and will trade under the same conditions in order to promote fairness.
You will often see performances by the winners of this big gamble which are extremely high in a very short timeframe. You could see participants take a $10,000 account and in five days turn it into $1,000,000. A lot of newbies are mesmerized by this performance and get blinded by what really happens.
Those who achieve this type of performance are nowhere to be found in a real account, the primary reason is that you will never trade the way you play in a forex demo contests in a live account. In order to win such a contest you will have to basically go all-in all the time and hope you get it right so you can double up. This has nothing to do with trading and is gambling at best.
Here is an example:
- 1st Trade: $10,000, double to $20,000
- 2nd Trade: $20,000, double to $40,000
- 3rd Trade: $40,000, double to $80,000
- 4th Trade: $80,000, double to $160,000
- 5th Trade: $160,000, double to $320,000
- 6th Trade: $320,000, double to $640,000
- 7th Trade: $640,000, double to $1,280,000
A forex demo contest is one of the worst mistakes a new trader can make as it will encourage the wrong mindset, promote bad trading habits and exploit an illusion which new traders will follow and fail at. On top of that the won money from a demo contests has conditions attached to it which most will never meet. The broker hopes that you will take your winnings from the contest and trade the same way you did in the demo contest which will always lead to a complete loss.
Stay away from those contests; take your time to learn how to trade. You can start right here at Paxforex and make use of the free forex trading course offered here. Don’t rush this step as it is crucial and once you feel comfortable open a real account, deposit your own money and start to work on a strategy which does require time. Once you have taken the right steps you will be able to enjoy the positive impacts of trading forex successfully.