What Are Forex Demo Trading Accounts?
Our guides here at Trading Brokers have covered a variety of forex topics, including how to trade crypto and forex and the best crypto brokers. We have spent many years analysing and research everything from brokers, platforms to trading strategies. Hopefully, you have found something useful along the way, including what we will cover in this article dedicated to demo trading.
Something that crypto and forex traders need to consider, is that these are quite volatile instruments. For example, the dollar is currently fluctuating against the euro (as well as other currencies), and Yahoo Finance explains it is expected to continue its ups and downs until the European Central Bank makes a decision regarding a possible bps rate hike soon. Those new to the forex trading scene need to be aware that news such as this can easily affect the trading rate of their favourite currencies, while other news that seems ground-breaking may not end up being so. A good rule of thumb for beginner traders is to practice with demo accounts to see what type of news affects currencies the most – without losing your actual hard-earned money. I have had hundreds of demo accounts over the years and find them to be an invaluable tool for practising my strategies and testing a broker to see what they have to offer.
What are forex demo accounts?
Forex demo accounts are accounts that most trading platforms offer with the purpose of helping new traders experiment and learn how to trade without using real money. As such, traders won’t earn any money through these demo accounts either. Think of them as a “try before you buy” option, allowing you to not only learn how forex trading works in general, but also how each platform works before you jump in and decide to pay for a real account. You can also use a demo account to test out new trading strategies before trying them on your real account. It’s a great option for traders who are new to forex – after all, approximately 70% of them have been trading for only three years or less.
When you are trading on a demo account, you get free access to a trading platform that comes preloaded with virtual funds. You can take time to get used to how the platform works and practice your forex trading strategies. This is a good way to build some confidence and see what strategy works best for you. Once you have sustained some success for a long period of time, you may then consider making the switch over to a live account. However, it is important to remember that there are some significant differences between trading on a demo account and using real funds. For instance, demo trading cannot account for certain human emotions such as fear, anger and greed. These are all things that can have a significant impact on your performance.
Some traders may even consider opening a micro or mini lot forex account. This type of trading account lets you get access to a real trading environment with lot sizes from as low as 0.01. I think this is a good way to get a feel for trading in live conditions with a minimal amount. Either way, demo trading is an important part of any trader’s journey. Even though I have been trading for many years now, I would still always want to test a broker on a demo account to begin with just to make sure they have suitable conditions for my manual and automated trading strategies. It can also be a good way to gauge what kind of support you will get from the broker.
How can you use them?
Many of the best platforms offer demo accounts. For instance, Trading Platform Web 2.0 is currently one of the most popular. FXCM details that it’s a demo trading account and has all its integrated features available, such as an economic calendar, cloud storage, and advanced charts and analytics to help you keep track of your trades. As a result, the transition from demo to actual trading is exceptionally smooth. Such a transition can eliminate steep learning curves for those who are not familiar with the intricacies of forex trading. Once a trader feels confident enough to try out their trading strategies for real, it’s just a question of switching over to a real account and depositing the amount they wish to trade. Investopedia adds that even though demo accounts are excellent for new traders, experienced traders can also benefit as the demo account gives them the chance to test out new strategies without risk to their current portfolio.
When using a demo account, it is a good idea to try out all of the different tools that you have at your disposal to make sure that you will be getting the most out of your trading. Many of you may already be familiar with some of the more popular technical indicators such as the moving average and MACD. However, if you browse around the platform on whilst using a demo account you can experiment with a plethora of other interesting trading tools that could further enhance your trading strategies and the platforms functionality. Every trader is different, so with some trial and error on demo accounts, you can see what combination of indicators work well for you and develop your own unique trading strategy templates.
All in all, getting a forex demo account before jumping headfirst into trading or for testing out new strategies is a great idea for both beginners and experienced traders. Most trading platforms offer them, and the good ones will include most, if not all, of their integrated features so that switching from a demo account to the real deal is a painless, easy process. Just remember, there are some distinct differences between demo and live account trading. This can include the spreads, commission, liquidity, execution speeds, server, human emotions and more. Therefore, make sure you have a clear understanding of all these differences and the risks involved before you start.
Is it hard to be a successful stockbroker?
The world of stock trading can be very lucrative for those who know how to…
Ways To Trade or Invest in Gold Investments
Gold is a precious metal usually used to make jewelry. But did you know that…
What Is a Bear Market And Is It Smart To Invest In one
You may have heard the term "bear market" before, but what does it mean? While…
5 Ways GDPR Affects Brokers
Data brokers are valuable to most establishments, but how do they affect you? Data or…
Why do most financial sites do a poor job when reviewing FX brokers?
We all know that many financial websites do a terrible job when it comes to…
The Importance Of Backtesting Strategies For Trading
We tend to learn from the past, implement those lessons in the present, and modify…