The Investor Diary Entry #76: February 26, 2025
When I first started trading Forex back in 2003, I didn’t think much about risk management. Like many beginners, I was focused on finding the perfect strategy, making the perfect trade, and doubling my account in no time. Still, even when I came back to Forex trading two years ago, I was still focused on finding the trading methodology that best suited my style.
Now, after more than two years on a Forex practice trading account, I’ve learned one undeniable truth: risk management isn’t optional—it’s the core of sustainable trading.
I’ve spent these years refining my approach, testing different risk management strategies, and building a methodology that I can trust. Only in January 2025 did I finally feel like I had a solid trading method paired with a structured risk management plan. Even now, I remain in demo trading, and I’ll stay here as long as it takes until I achieve my financial goals. Moving to live trading before proving my system in demo would be gambling, not trading.
Why I Chose a Forex Demo Account for Risk Management
I knew that jumping into live trading without a well-tested risk plan would be a fast track to losing money. Many traders blow their accounts because they underestimate how psychological pressure impacts decision-making. The moment real money is involved, fear and greed take over, making it nearly impossible to follow a strategy objectively.
A Forex free demo account removes that emotional layer, allowing traders to refine their methods without financial consequences. But a demo account isn’t just a training ground—it’s where I built my risk management framework from the ground up.
My Personal Approach to Risk Management in Demo Trading
Through trial, error, and relentless testing, I developed a structured approach to risk management. Here’s how I ensure every trade I take aligns with my plan:
1. Treating My Demo Account Like a Real Account
I don’t inflate my virtual balance or take oversized positions just because it’s not real money. My demo account mirrors what I would actually start with in a live environment. Every risk decision I make is based on real-world conditions.
2. Strict Risk Per Trade Allocation
I never risk more than 1% of my account on a single trade. This risk per trade was hard to follow at first, but once I started tracking my performance, I saw how this rule kept me in the game, even after a series of losses.
3. Using Stop-Loss and Take-Profit Properly
In my early demo days, I placed stops randomly, without much thought. Now, I set them based on key market structures—support, resistance, supply and demand zones—while ensuring my risk-to-reward ratio is at least 1:2.
4. Testing My Trading Methodology in Different Market Conditions
It took me over two years to refine my strategy. A system that works in trending markets might fail in ranging ones. I’ve tested my plan across multiple conditions, from high volatility news events to slow consolidation phases.
5. Controlling My Emotions, Even in Demo
Many traders disregard emotional discipline in demo trading, but I approach it as if my financial future depends on it. If I break my rules in demo, I know I will break them in live trading too. My goal is to develop consistency before I risk real money.
Why I’m Staying in Demo Until I Reach My Goals
Unlike many traders who rush into live accounts after a few months, I’ve made the deliberate decision to remain in demo until I achieve my financial targets. My journey is not about getting rich overnight—it’s about building a system that will allow me to trade profitably for years to come.
I refuse to let FOMO (fear of missing out) push me into live trading prematurely. The market will always be there, but my capital won’t survive reckless trading. I am not in a hurry, and I encourage others to embrace this mindset.
Key Takeaways for Traders Struggling with Risk Management
If you are still figuring out how to learn risk management in Forex trading, I have one piece of advice: take your time.
- A Forex demo account is not just a practice tool—it’s where you perfect your discipline and test your strategies without risk.
- Risk management is not about avoiding losses; it’s about ensuring your losses are controlled and your wins outpace them.
- Live trading should only begin when you have a proven, consistently profitable method in demo.
Final Thoughts
Risk management isn’t something you “add” to your trading—it’s the foundation. Without it, even the best strategy will eventually fail. My journey in demo trading has taught me patience, discipline, and most importantly, how to protect my capital when I transition to a live account.
If you are serious about trading success, don’t rush. Use a Forex practice trading account to master risk management first, and only then consider live trading. Your future self will thank you.
The Investor
Wednesday 26 February 2025
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second, as a place where I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links, I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For more detailed information on my affiliate disclosure please refer to the Full Affiliate Disclosure page.
Furthermore, this site is in no way or form giving any financial or investing advice, nor it is encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share it for informational, educational, and entertainment purposes.