What Size Of A Demo Account Should I Practice With?

I was speaking with a good friend the other day; about demo trading versus live trading, and how to make the transition smooth.  He mentioned that he had not yet started trading live, and that he had been offered by a broker a free demo account with an initial balance of fifty thousand dollars.  He stated that when he did go live it would not be with that amount.  He then asked “Was this a good way to practice trading the platform?”

This is my feeling on the subject.  When a broker advertises “Open up a free demo account” with a large dollar amount attached I think it is poor form.  This gives the beginner and anyone unable to trade with that large of a dollar amount right off the bat a faults sense of security.  I think it is premature and greedy on the part of the broker.

By all means offer a free demo account to test the platform and tools.  There is nothing wrong with that.  Plain and simple only practice trade what you would realistically trade with live.  Until you know how, and have built a solid track record that you can prove to yourself.  I would cut that amount you think you would trade with in half.  Start small!  We have an individual that started trading with five thousand dollars and in a matter of six months brought it up over a staggering sixty thousand dollars.  He did this playing very conservatively; trading only three to four percent of his account total on any given trade.

If five thousand is still more than your bank account can handle start smaller that is fine.  But please exercise good risk management and money management practices.  No trade is worth risking too much.