What is Forex Trading Demo Account

A demo account is a pretend account which allows a learner trader to test their trading skills. It enables one to learn all about trading without risking losing their money as there is zero risk. A trader is supposed to wait until they make profit on the demo account before trying the live account so that they don’t lose their investment. A forex demo account makes use of virtual money instead of real cash money.

It is recommended that one sticks with one currency while demo trading as it can get really hard to keep track of more than one currency pair as a beginner in trading. Patience is a major contributing factor to success in demo trading as you need ample time to concentrate on creating profitable trading habits and to learn the ins and outs of the trading process.

Finding the best demo account may be tedious as it requires opening of numerous demo accounts with different forex brokers in order to find one of your liking. This article will provide you with all the information you need to know before you start trading on a forex demo account.

How real is a forex demo account?

Forex demo accounts reflect exactly what is happening on the live trading on a trading account that uses real money. Traders on a demo account get analysis charts and price quotes that they would get if they were live trading. It is the same in every aspect with real trading account with the only difference being that it uses virtual money instead of real money for trade transactions.

How does a forex trading demo account work?

A forex trading account is meant to create a testing ground for traders to test out their strategies before they can implement the strategies in live trading. It also gives potential traders a feel of how the trading platform looks like.

What to look for in a demo account

The layout and functionality of a demo account is similar to that of a live trading account. To get the best out of a demo account, you should check for factors like trade reports, order placemen and basic layout

Advantages of using a demo account

1. Familiarization with key features

A beginner trader is supposed to familiarize themselves with key trading features such as charts and indicators to gain a trading advantage. A demo account allows a trader to familiarize themselves with these features for as long as they want.

2. Trading strategy development

For a trader to be successful, they need to choose and stick with a certain trading strategy. Different strategies work for different people and a demo account enables one to test out different strategies and find out what is best suited for them.

3. Control of emotions

The most preferred way to learn how to control ones emotions n forex trading is by the use of a demo account. In order to achieve this, it is essential for one to treat a demo account like you would in the live trading market.

4. Instruments selection

Forex trading brokers offer a wide variety of currency pairs that on can choose to trade with. One might have a problem in picking the best currency pair but a demo account allows one to master how to trade in them over time.

5. Determining the correct lot size

Many forex trading brokers have a standard lot size of 100000 units but some offer different trading accounts which require a certain number of lot sizes. Using the demo account allows one to try out different lot sizes and determine the most ideal lot size to use.

Limitations of a demo account

1. It doesn’t provide the same level of emotional intensity that live trading provides.
2. It is not possible to get any trading profits when using a demo account
3. Traders may pick some habits while trading on a demo account which might be hard to break when one starts live trading.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.