Nadia Jenkins

Currency trading is hardly child’s play. Although there are limitless profit opportunities, this form of trading also involves a tremendous amount of risk. This is clear as any broker site you visit online will tell you about the risks involved in leveraged products, which place you in a position where you may potentially lose much more than the money you invest. For this reason, traders who are new to Forex should practice for free by signing up to demo account Forex. This enables them to try out different broker platforms, or to test a variety of trading strategies for free, without risking their money.

Why You Should Use a Demo Account Forex

There are a host of Forex brokers who act as an intermediary between the trader and the expansive Forex market and liquidity providers. Brokers facilitate trading through their trading platforms. Due to the large number of Forex brokers available online to retail investors and an even greater variety of trading platforms, new traders are strongly advised to learn all the features and qualities of their platform of choice by signing up to a demo account Forex to test their strategies before committing their money.

How Demo Trading Works

First off, a trader should become familiar with how orders are placed within the platform. In the majority of cases, long positions in demo account Forex are entered into by clicking on an ‘ask’ quote or a ‘buy’ button which is typically presented within a popup window. A short order is completed when a trader hits the ‘bid’ button or ‘sell’ link. There are some platforms, however, that will let you place your orders directly when you click on the price chart.

Forward Testing Trading Strategy

After you have made up your mind about which currency pair you will invest in and how you will trade, you have two options – forward testing and back testing. When you use back testing with your demo account Forex, you gain the benefit of collecting a lot of data on your strategy very quickly. The only drawback involved is that you invest very little emotion or involvement in a back-testing strategy. When you look at it in hindsight, you can quickly see if the plan you had worked out would have worked or not, and how you would have reacted to the results of the trade. This is where forward testing comes to the fore: while it takes longer to confirm the viability of your trading strategy, it gives you the feeling that you are in a live trade, with all the emotions that come with it.

Learning from Mistakes

When you are forward testing on a demo account Forex, it is inevitable that you will make a few mistakes including entering trades too early, making too many trades, cutting short your profits and making biased decisions on market direction. All these are mistakes that all traders make when first starting out in the Forex trade. These are likely to be very costly if you are trading with your funds instead of virtual currency in a demo account. The demo account allows you to make mistakes and to learn from them without having your money at stake.

The Bottom Line

Demo trading is all about staking virtual money on your trading strategies. However, how real the experience is, depends on you and how you relate to your demo account Forex. You should treat the demo account as if you were trading with real money, which means that you should stick to your trading plan in order to gain confidence in it and be ready to go back to the drawing board if it does not work.