The Great Benefits of a Demo Trading Account for All Forex Traders

demoIn this article written for new, aspiring and eager to learn forex traders we explain the benefits and side effects of a demo (demonstration) trading account in relation to forex trading. The Merriam-Webster dictionary defines demonstration asan act of showing someone how something is used or done.’ If you are new to forex you are probably wondering what a demo account is and how you get hold of one.

A demo account is a forex trading account that is provided for you (the client) by the forex broker (of your choice) that requires no funds of your own to be deposited. The demo account will look almost the same as a ‘live’ trading account. (a ‘live’ trading account will be provided to you by the same broker, where you will need to deposit funds in order to trade the forex markets) Choosing a forex broker may be dependent on the country you reside in. Here is a link to a website  that provides a list of forex brokers.

The demo account provided by your broker will allow you to place trades against ‘live’ market rates, the difference being, that your profits are not real money, and fortunately neither are your losses. Most demo accounts, provided by all good forex brokers will be almost as good as their ‘live’ trading accounts with regard to the speed of execution and stability of a normal trading platform, though understandably, the brokers will invest their best resources in the ‘live’ forex platforms, and the demo accounts are usually a little slower, or older, but that is perfectly alright for you to practice forex trading on. Think of a ‘demo’ trading platform as a slightly older model, well used car, perfect to take your first driving lessons in, where a few more scratches and bumps along the way won’t make much of a difference.

But what is the point of a demo trading account and do you really need one? In our opinion, the answer is always yes. If you are learning to trade with our Forex Trading Course for Beginners you need to have a demo platform to learn the basic forex skills as taught in the course. Advanced forex traders also use a demo platform to experiment with new trading methods without risking real money, and traders with programing skills will use a demo trading account to test automated trading programs also known as algorithms or ‘expert advisors’.

So, let’s get straight to the benefits of a demo trading account and how you can make the most of it.

  • LEARNING – This is exactly the reason that demo trading platforms are created. For everyone to learn how to enter and close forex positions without risking real money.
  • PRACTICING – Like hitting tennis balls against a machine that shoots tennis balls at you. You can practice as much as you want, and if you need more practice, you just fill up the machine with more tennis balls provided by the broker.
  • EXPERIMENTING – Forex trading is dynamic. There are many ways to trade, and many methods of trading. Some indicators and some signals work better than others, and some time frames are more suited to trading styles than others. You will figure out which is best for you on a demo platform.
  •  RECORD KEEPING – Demo platforms keep track of your trades, winners and losers in the same way a ‘live’ trading account does. Use the demo to see where your best and worst trades happened.
  • FOCUSING – After trading ‘live’ and having a few winners, you may suddenly become over confident and make reckless trading mistakes which need correcting. Reverting to the demo account is the perfect remedy to refocus your trading on the correct habits before you go ‘live’ again.

All things said, we are great believers in the demo trading platform for all forex traders, good or bad, happy or sad, frustrated or elated, it works for everyone. However the first thing you will hear from other traders is that the demo account is never the same as a live trading account because your emotions are completely different when you trade live and when you trade demo.

Absolutely true. Trading with real money, invokes real emotions which is why there are so many books written on trading psychology, which is a field of study all about your emotions.

worldofwarcraftPicture yourself playing a computer game like World of Warcraft. You are sitting at your desk, laughing, joking, eating a bag of crisps and shooting everything in site while dodging bullets, lasers and bombs yourself. Imagine if you really were in the game in real life. Would you be laughing or would you be sweating as bullets fly past your head? Would you waste all your ammunition if you had limited bullets with you? Would you care if you got shot or not?

      CONCLUSION

Don’t waste your Demo Account as some sort of a computer game. At Pip Asylum, we encourage all aspiring and experienced forex traders to treat it with respect, and use it to create as many trading circumstances that relate to the way that you actually would trade if you were in the game for real.

If you can treat a demo trading account with respect (like looking after an old car) you definitely will have the capabilities of being trusted with a brand new sports car, and your transition to ‘live’ will be all the more successful!

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One Response to “The Great Benefits of a Demo Trading Account for All Forex Traders

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