Where to go next: after the demo account (Part 1 of 2)

So far I’ve built up some experiences based on ‘fake’ money and following the emotional drive, which has led to significant losses and increasing losses. Since it is only a game, I recognize that I’m playing it rather than taking it seriously. From this perspective I’m unable to convince myself that it’s worth only practicing in a demo world. I see the need within myself to put real money on the line and see how I respond.

In this 2-part series, we have taken an overview of the options within the Forex trading world. May this be a platform to launch into further studies for yourself.

In this first article, the following options are discussed: live account, managed accounts, PAMM account, and friendly betting.

The second article includes a discuwession of the following options: auto account, Copy trading, Social Trading Networks, acquisition or auxiliary partner, and broker affiliate;  as well as a final recommendation.



Article Intention


Let’s look at our options of how to move forward.


Let’s say that you, like I, have spent some time trading in a demo account and are considering opening a live account, perhaps with a small amount of initial investment.


Here, I want to introduce to you some options of how to bring in real money with real potential for gains.



A bit of my story for you to relate


Have you ever played poker for fun without any real money on the table? Have you also played for real money? Perhaps you have experienced the vastly different arena of these two situations.

In my experience, there is a completely different motivation whether money is at stake or not. When the game is for fun, the motivation is around the idea of “I want to win”. As a player, I recognize that it doesn’t go much beyond this ego-centered thrill. When there is money on the line it brings in a host of other things, such as dreaming about what I could do with the money. It can even be non-selfish as in: If I win I’ll be able to surprise everyone and use the money to buy us dinner or take us to a movie! 😀. Or it can be selfish like: If I win I’ll be able to buy myself some really nice chocolate, and totally eat all of it before I get home so I don’t have to share. Concerns about losing may also surface: I had to work for 2 hours to get this money, I’m not about to lose it to these other people! Either way, the emotional ride changes when money is up for grabs.

Likewise, in the Forex trading demo platform I’ve noticed that I’m really just playing the game for fun. The motivators are soft and the pressure is soft. I want to do well, I want to learn, and I want to get better, but there is no real consequence if I make a bad move and lose a bunch of equity.

So for the sake of this story, and as if I was training to get involved in actual Forex trading, I’ve considered the question: “how can I get involved with some real money?”

3 options come to mind:

    1. Open a live account and become a trader
    2. Open a Forex managed account
    3. Open a PAMM account
      And a 4th option that you may have not considered before:
    4. Place a bet with a friend related to gains in a demo account

In the second article we will explore:
A further set of options are to partner with the robots:

5.Open an Auto Account

6. Copy other traders

Other ways to get involved without bringing in capital:

7. Partner with a PAMM account manager; rather than investing

8.Become an affiliate of a broker; rather than becoming a client

1) Open a live account and become a daytrader

Many newcomers may be tempted to choose this option for a variety of reasons. Perhaps you’ve made gains in the demo account and are feeling confident to put your own money on the line. Perhaps you want to take all the reward and you think you are ready to manage the risk. Perhaps you have your own completely unique reason to open an account and reason to start trading live right away.

Please continue reading in case you have thus far overlooked something important and that maybe you can get what you are looking for in an alternate form that actually better suits your needs and interests.

As an overview, becoming a daytrader means
Risk to your capital investment: completely in your own hands. You are driving this crazy car!
To consider of yourself: How well do you know the market you are trading in? How much time can you invest? How well do you understand the forex trading platform? How good of a driver are you and how well do you understand the rules of the road?

→ ←

+ You choose in which assets to invest.
+ The reward is all yours.
+ Greater emotional thrill, more adrenaline from trading and winning.


  • The learning experience may be greater or less depending on your style of learning. Some may learn better by doing and seeking answers, others may learn better by watching someone else and receiving information.


– The risk is all yours.
– May require a large starting capital and a large investment of time.
– Greater emotional toll on your body, mind, and entire being.

As additional research, consider reading this article [1] about minimizing your drawdowns, and how to enter into a breakout market as a trend trader and how to exit before a big loss near the top. Continue reading in #3 where we discuss a bit more about the realities of drawdowns in any account, even PAMM accounts.

Due to our gains in technological advancement, another tool, called Social Trading is available to all traders, and may be particularly useful to the day trader. These Social Trading Networks are websites where people meet to exchange information, ideas, strategies, and their current decisions in the trading world. A member of these websites has access to the information, has the ability to communicate in forum or in personal messages, and can even copy trades directly [2].

This idea of copying someone else’s trades is discussed more in #6, within the second article.

2) Open a forex managed account
Choose between PAMM, LAM, or MAM. In this article we discuss the PAMM account in more details, and for a comparison of all three, I suggest starting with this article [3], or doing your own research.
The quick scoop of Lot Allocation Management Module (LAMM) is for when you and the account manager are both invested with the same amount of capital, and the Multi-Account Manager (MAM) for when you want higher leverage than usual, or higher than other investors. The MAM option is for investors who are prepared to take on higher risk.

3) Open a PAMM account
Commonly referred to as Percentage Allocation Money Management, or more formally known as the Percentage Allocation Management Module. [4]
An important feature to bear in mind is that managers usually involve their individual trading capital alongside yours. In this way, the one managing the money has their own personal gains and personal losses at stake, which is likely to encourage a careful and thoughtful attitude. However, you may never know how much that capital investment actually means to the manager, and so it is wise to enter the trading market prepared to lose all of your capital, and even a bit more; this is the downside of trading with leverage or on margin.

As an overview, investing with a PAMM manager means
Risk to your capital investment: in the hands of the money manager. Your risk remains in choosing the correct manager. You are a passenger on this crazy bus! The manager is the bus driver.
To consider of others: How well does the money manager know the market? What is the ranking of the money manager. Often times, people will refer to the manager’s gains, the duration of trading or age, and the drawdown.[5] How dedicated is the money manager and how much are they invested? How confident are you in the bus driver?

As a starting point on the topic of choosing a PAMM manager, consider this article and the header “How to choose a manager for PAMM investment?” [5]
The essence is that:

  • Drawdown gives you an idea of how much of the equity is at risk during trading. A higher % value means more risk. It is based on past performance.
  • The duration of trading, or account age, tells you for how long the manager has been trading with this particular profile not necessarily their entire trading career. This will give an idea whether there is some history to build confidence with the manager’s current trading strategy.
  • The gains or profitability give you an idea of what kind of gains have been seen in the past.
    • The recommendation appears to be to balance the drawdown and profitability such that the potential for risk is no more than 3 times the potential for gain.

As a side note, this article [6] gives a decent opinion about the need to be prepared for drawdowns, which are sometimes simply a reality of life between equity highs.

Ready to open a PAMM account? The former link takes you to a reputable broker, and you may also consider referring to this recent article [7] for a brief description of how to set up a PAMM account and what it means.

4) Place a bet with a friend related to gains in a demo account
As an alternative to investing money online and risking finances beyond your initial capital, consider placing a friendly bet for real money.

Why would I do this? 2 main reasons: First is to change the game from the demo version to one where there is actual money on the line. My thinking is that this will create a situation where I take the game much more seriously, and this will allow some of those hidden internal motivators related to money to surface. The second is to protect myself from substantial loss. Due to the way the trading market and placing orders works, it is possible to lose more than your investment. This may happen due to leverage or improperly used stop-orders. Read more on the risk of leverage in Investopedia’s article under the subtitle ‘Downside of Leverage’ [8] The same article shares information about the usefulness of leverage, so don’t miss that important piece as well!

For more on stop-orders, and the difference between a stop-market order and a stop-limit order, check out this article from The Balance [9].

→ ←

+ Gradually introduce new kinds of pressure to your trading life.
+ Avoid the potential for a substantial loss. This might happen simply because of something I have yet overlooked, something that could be completely unknown to me as a newbie.
For instance, have you considered the risk of a HUGE financial loss due to leverage? How about the fact that a stop-order may not trigger in the event of a sudden market downturn? Or, how a stop-market order does not necessarily trigger at the price you requested in a fast moving market? Or, how a stop-limit order may never trigger?

– Very limited potential for gains

What this writer is considering to do next
Place a bet of moderate amount with a friend, for this example let’s say $50. This is enough for me that I will take the challenge seriously, but not above what I am comfortable losing.
We may simply both invest $50 and then set a time-limit and a target of gains. If the target is met within the time limit then I win $50, and if not then my friend wins $50.
Alternatively, the details of the bet could be something like: If I can make a 10% profit this month then you buy me ice cream or some mint tea (as it may be), and if I lose 10% then I’ll buy you ice cream or give a foot massage. I can keep doing this kind of friendly behaviour until one of us has spent their $50. Or in the case of a foot massage, the money can be completely removed from the equation but still increase the stakes by offering gifts like foot massage, or cleaning someone’s roof or their car or bicycle, so on. It can also be a way to organize some social time with a friend that I haven’t been seeing enough of lately.

How much money are you prepared to say goodbye to?
Someone once shared wisdom with me about lending money: they said that when you lend money, pretend that you will never see that money again, that way you are prepared to lose it all and you are comfortable with giving the loan. If you can’t stand the idea of losing it all, then you probably shouldn’t lend that money. Same here, if you can’t stand the idea of losing all your investment, then you probably shouldn’t enter the trading market with that much money.

Am I prepared to lose it?

1) Darrin Donnelly. 2012. The Easy Way to Minimize Drawdowns [Online]. Darvas Trader. Available at: http://www.darvastrader.com/2012/07/11/easy-way-to-minimize-drawdowns/ [Accessed 20 Dec 2017].
2) How Does Social Trading Work? [Online]. Binary Tribune. Available at: http://www.binarytribune.com/social-trading-academy/how-does-social-trading-work/ [Accessed 20 Dec 2017].
3) Maksims Fausts. 2014. PAMM, LAMM, MAM….Are You Confused? [Online]. FinanceMagnates. Available at: https://www.financemagnates.com/executives/insights/pamm-lamm-mam-confused/ [Accessed: 20 Dec 2017].
4) Shobhit Seth. How Forex PAMM Accounts Work [Online]. Investopedia. Available at: https://www.investopedia.com/articles/forex/010715/how-forex-pamm-accounts-work.asp [Accessed: 25 Dec 2017].
5) All About PAMM Accounts [Online]. ProfitF. Available at: http://www.profitf.com/articles/forex-education/pamm-accounts/#How_to_choose_a_manager_for_PAMM_investment [Accessed 20 Dec 2017].
6) 5 Things You Need To Do To “Live Through Drawdowns” [Online]. NetPicks. Available at: https://www.netpicks.com/5-things-need-live-drawdowns/ [Accessed: 20 Dec 2017].
7) 2017. PAMM Managed Accounts Invasion of Forex Trading [Online]. FxTradingRevolution. Available at: https://www.fxtradingrevolution.com/forex-blog/pamm-managed-accounts-invasion-of-forex-trading [Accessed: 20 Dec 2017].
8) Leverage [Online]. Investopedia. Available at: https://www.investopedia.com/terms/l/leverage.asp [Accessed 25 Dec 2017].
9) Adam Milton. 2017. Stop Loss Orders – Market or Limit? [Online]. Available at: https://www.thebalance.com/stop-loss-orders-market-or-limit-1031053 [Accessed: 12 Dec 2017].
10) Equity [Online]. Investopedia. Available at: https://www.investopedia.com/terms/e/equity.asp {Accessed: 25 Dec 2017].
11) Asset [Online]. Investopedia. Available at: https://www.investopedia.com/terms/a/asset.asp [Accessed 25 Dec 2017].
12) Drawdown [Online]. Investopedia. Available at: https://www.investopedia.com/terms/d/drawdown.asp [Accessed 29 Nov 2017].