The answer is yes and no or it doesn’t matter, or does it!

*scratching his head*

When you‘ve just started forex and opened a demo account you’re just like a superhero, virtually of course, with a lot of money, fake one obviously. Something like batman except not with batmobile, but with a batatrader or any other bat platforms.

“Do you really want to say something valuable?”

Sorry, let’s look at the question one more time. Are demo accounts rigged by forex brokers?

First of all, let’s look into this question on what brokers can do, and then we’ll get back to the batman subject after that.

How Can Brokers Rig Demo Accounts?

There are some small differences between demo accounts and real accounts in some brokers but it’s hard to understand the intention behind those kinds of dissimilarities.

The differences may be generated from the different feed source that brokers choose to show the price to their clients. For example, in real accounts, they have to take your order and based on the types of the brokers, they send your order to banks, their liquidity providers or anywhere else that they have to fill the orders, then they take the orders and deliver it to you, of course with a spread or commission.

On the other hand, in demo accounts, they may show you a neat chart with the final result. So you have the same chart but you can’t see if there are problems such as time latency or requotes or slippage. If you don’t know the meaning of them you can click here and read the broker part of that post to figure out or if you don’t feel like, in general they mean delay in your order execution or increasing spreads.

First off, those differences don’t matter if you are not a scalper and when you don’t want to enter and exit the market fast with small pips. That’s what scalpers do, so instant execution and small spreads do matter.

Unlike the scalpers, if you are a swing or position trader who takes long-term positions with large fat SLs and TPs, you probably don’t care about a few tiny pips that some brokers might try to squeeze out of your account. In this case, you may see a few seconds delay or starching spread nominally. What would you say now? Probably, “to the hell with it”

Brokers may do this intentionally or without any evil purposes. If it annoys you or you are a scalper and you don’t want your socks to be knocked off when you open your main real account, first off, trade with the demo accounts of a broker to see if you encounter with such problems.

How Can You Test Brokers?

For this purpose, you should test the broker in different situations to get a better understanding of the implementation of your orders by the broker in those situations.

First, open several positions in a row to see if you see any requotes or delay in your order execution. You should do it for a few days and as many as you can to have a better and reasonable sample size to rely on. For example, don’t do it just a few times for one day. That’s a demo account so no harm no foul.

If you can’t see any requotes or any slippage you should be somehow suspicious because they are probably giving you offline numbers. Of course, the charts and numbers are real but they are not according to the real circumstance of the market. Therefore, you need to dig deeper.

The next examination you can do is to trade on important news to see the performance of the broker in those situations. If your broker is a market maker with fixed spreads they probably have to give you requotes on very important news such as NFP. If they don’t, it really smells fishy because in real accounts they will give you some requotes on those occasions. Of course, the less requotes you see the better, but none, that’s not gonna happen in the real world.

If the broker is STP or ECN, they should have slippage and widen the spread in such situations, because the movements of the market on important news are so fast that they often can’t give you instant execution and most of the times, if not all the times, your orders will be filled with slightly different numbers than your initial order.

Again if you try this for several occasions and you can’t see any of those problems, your chances that your demo account is rigged, with the definition of rig here, is absolutely high, or even more, you can be sure that they are giving you a different situation than the real account. But if you are not convinced and you think that your forex broker is awesome, you can go to the next step before opening your main real account with them.

Now, you should open a small, micro or mini, account to try the broker in real situations — do it according to your scalping strategy and at your own discretion. All brokers have different types of accounts, so you can pick the smallest one and try the same things as you did for the demo account.

If you see instant execution or there aren’t any requotes or delay you probably find the holy grail so stick to it and don’t let it go.

 Of course, one requote that happens every now and then, especially on news, is acceptable, providing that they accept your order after that. It’s the same for slippage. Slippage is not always against you in nature. Sometimes they benefit you and give you better orders than you requested and sometimes they go against your favor and are executed at the worse price than you wanted.

If you see a broker with this condition, even if they provide different and better conditions in their demo accounts, you can continue with them because they don’t do that wickedly.

On the other hand, if you see huge differences and everything is upside down, your broker is definitely rigging the demo accounts to lure you to open a real account.

 ♪ let it go let it go turn away and slam the door♪

*popped into his mind*

Why Do You Perform Differently In Real Accounts?

Ok, now let’s take a look at the batamobile subject.

“really, again!”

No no, don’t get me wrong, I’m serious. It’s about another angle that makes you think that demo accounts are rigged by forex brokers.

You don’t even scalp or enter short-term positions. You are actually a swing trader or you can even be a day trader with rather large limitations (TPs, SLs). You don’t even care about a few pips and maybe you haven’t noticed that.

So, what has changed that you think the system is rigged? You’ve changed.

“What are you talking about? I’m the same person, at least the same as yesterday”

Oh, I know. I don’t mean physically. Do you? Is there anything to build muscles overnight?

“ok, now you’re messing around again. Spit it out”

Sorry, I mean you’ve changed mentally. You are not the batman with next to no mistakes. Your technical stuff now seems useless and your batatrader is more like a batmobile with only reverse gear that its mission is to shrink your account as fast as possible.

Welcome to real account trading where you need to manage lots of things including your money, emotion, and strategy, and you need to do all that for your tiny account that you open to get to the bottom of this forex thing.

My First Real Account

I remember my first real account after 4 months of demo trading. It was a $500 account that I opened to test everything I had learned in the real world. Not to mention, I had several demo accounts that I turned them into a demo bank and I saw myself something between Bill Gates and Warren Buffet!

I really was a virtual billionaire who didn’t care about a few hundred dollars because I would finally be supposed to be one of them in a short amount of time — with a 4-month experience. To cap it all off, those successful demo accounts had given me an enormous ego.

Now with that mindset, I opened a $500 dollar account. The next day, I was as miserable as sin. What had just happened? The second position I opened went against my favor and I didn’t care because that little bastard must have come back and given me the profit like always did or at least I thought it’d been always like that.

Well, it didn’t, and I didn’t stop it from ruining the whole account because I had done the same with the demo accounts in the past and I didn’t pay attention to those that had gotten a margin call. Oh, by the way, the account had a large leverage. It happened way back and I can’t recall what the exact leverage was but it was so much big that the account got almost empty after the disaster.

When you play with demo accounts at your early stage of trading, you don’t even notice when you make mistakes. You don’t have money management and strategy. You don’t even know them well. You open one, and then if it goes south you open another but if it generates hundreds of fake dollars, you take credit for that.

Moreover, there is no emotion engaged so you don’t learn how to handle hard situations when they happen. You’re either too confident and stupid like me and when everything turns bad you can’t stop it, or you are too conservative and sometimes panicky that you can’t execute your strategy well and start closing profitable positions, or you are any other combinations of fear, greed, recklessness and ignorant.

As I’m writing this, I’m thinking that I was the full package. I was fearful to close that losing position so it might hurt my mindset and decrease a few dollars from the account. I was also greedy that I thought it would come back and turn into profit and reckless because I didn’t set a stop loss in the first place. Ignorant because I thought I knew the market where I wasn’t even close to understanding how everything works.

*staring into the horizon, pondering*

The Bottom Line

If this question that the demo accounts are rigged by the forex brokers comes to your mind, first see whether you take short positions or long ones. If you are a scalper or your positions somehow have a connection with small limitations, you can check and test the brokers in different situations of the market in both a demo and small real account to see if there are tangible differences. If you see meaningful differences that might hurt your strategy or your trading in general, let it go and find another one.

On the other hand, if you are a swing or position trader and a few pips can’t hurt your strategy and yet you see a significant difference between demo and real accounts, you’d better look into yourself and figure out what has changed. You should know that the whole atmosphere is different between demo and real accounts.

For both scenarios, you should consider that the purpose of demo accounts is to prepare you for the real accounts so you should trade them as if you were trading the real accounts.

They are also good to test your strategies. Look at them this way, what if you had to open a real account in the first place? That would be even more disastrous and we would make sillier mistakes that could cost us money from the first day of trading.