How to use a demo account in Forex trading?
A Forex demo account is a convenient tool by which you can check the broker, try new strategies. Beginners training account allows in a short time to study the features of the exchange and transactions. Money in such an account is not real, so you can not worry about losses.
Purpose of a demo account
Most often, the demo account opens for free, as an opportunity to assess the performance of the broker and the mechanism of communication with it. In some cases, such accounts are subject to restrictions and regulations, such as upper and lower transaction limits, and unavailable currencies or securities. This is not to be feared: the demo account is necessary for familiarity with navigation and interface, so it is not necessary to demand full functionality.
If you are willing to try a demo account, be sure to check how accurate the information on quotes provided by the program. It is not uncommon for dishonest brokers to twist values in one direction or another. Experts recommend running a third-party resource with graphs in parallel with the demo account and at least 10 minutes to observe price changes and other possible discrepancies.
Another common fraudulent practice is to provide access to the demo account only after the transfer of real money to a brokerage account. Experts advise such offices to bypass and work with brokers who open access to the demo account immediately after the registration process is completed.
Important differences
Often, the newcomers trade on the demo account is successful, but with the real brokerage account, things are bad. It turns out that it’s all about psychology: at the Forex demo account, no one worries about “drawn” finances, so traders are more likely to risk, use non-standard strategies, or even act intuitively.
Trading on the stock exchange can become a full source of income, but for this, the trader must constantly improve his level of knowledge and qualifications. That’s what the demo account is for – it allows you to try out strategies, compare the percentage of positive trades, and choose from them the one that works best.
When to switch from a virtual account to a real one?
Experts do not advise staying on the demo account for a long time. Its task is to introduce the future bidder to the terminal interface, as well as to test the selected strategies. To see if you’re ready to move, try the following algorithm:
- Leave the amount in the demo account with which you plan to start a real investment;
- Act in accordance with your chosen strategy without switching to others.
- In two to three weeks there should be the first positive results – in this case, you can move on to real trades;
- if there is no profit, you should choose a different strategy and test it without leaving the school account.
The real training starts on a real account when the investor begins to gain experience. You can’t learn how to trade on your training account – it will allow you to master the platform functionality and try out strategies.
The bottom line
To sum up, let’s briefly list the benefits of the demo account:
- Assessing the specifics of trading activities for beginners;
- Gain experience in handling the interface of the trading platform;
- Endless testing of strategies, new assets, and tools
- Assessing the work of the broker and its software (including speed, functionality, technical support);
- Getting your first skills in analysis and working with fixed-term, currency, and stock markets;
- opportunity to learn how to control emotions – the trader should not react sharply to market bursts and unexpected events.
