This post was most recently updated on March 13th, 2023
The spot forex market was opened to retail investors in the nineties. Since then, it has become immensely popular with a large number of traders/investors all over the world. The retail forex trade is carried out via numerous forex trading platforms offered by forex brokers. FX market is complex so make sure you learn the basics before diving into forex trading.
Each of these forex platforms is designed to focus on different types of traders. Some are made specifically for high net-worth clients who require a lot of liquidity; others are designed for technical traders who need the latest charting tools while some are designed for scalpers who require fast execution. So how do you know which of these platforms are perfect for your trading needs? Enter the forex demo account. It is the safest and the fastest way to see if a particular trading platform suits your trading style.
Today we shall discuss the main reasons why you should trade a forex demo account and practice before trading live with your own money.
Test your Trading System
Using a forex practice account is the best way to evaluate and modify your trading system/technique without exposing yourself to real losses. Since all forex demo accounts have live price feeds, you can use them to test your trading system to see whether it actually leads to consistent gains.
You can also test pre-programmed EAs to see whether they are actually profitable over a period of time. Experimenting with a live account can lead to a significant loss of your trading capital, thus it is always better to try trading a demo account to begin with.
Examine your Broker’s Platform
Since there is no real difference between your broker’s forex demo and live trading platforms, you can use the demo to acquaint yourself thoroughly with your broker’s trading platform. Demo trading will let you discover how to open/close trades, how to manage leverage, how to set stop-losses etc.
Some proprietary trading platforms are a bit confusing to begin with but spending a few weeks trading a demo version of the same platform will make live trading very easy and effortless for you.
Try out the Charting Tools
Forex trading as we know it is largely based on technical analysis. In fact, most retail forex traders use spot charts to determine what and when to trade. Using a forex practice account allows you to test a platform’s charting tools before you commit real money.
You can use the demo’s charting tools to learn how to program your own EAs (Expert Advisors) and to test the reliability and consistency of your broker’s data feed. Additionally, you can also check whether your trading platform allows direct chart-based trading…which is a major requirement for scalpers.
To sum it all up, trading a forex demo account is practically compulsory if you eventually want to trade with your own money. Using a demo account for at least a couple of months will boost your level of confidence and make live trading simple and seamless.
Frequently Asked Questions about Forex Demo Accounts
What is the best forex demo account?
When it comes to trading, it’s important to be using the best trading platform. The forex demo account is a great way to learn the skills needed before going live with real money. However, the best forex demo account is the one that offers you the most features and tools for your needs.
How do I open a forex demo account?
Opening a demo account is easy. You can do so by visiting the website of any broker and signing up as a new customer.
The demo account has all the features of a live account like charts, order book, news feed and market data, but it doesn’t involve any investment of your own money. This way, you can trade without fear of losing your hard-earned money.
How long does a forex demo account last?
A forex demo account is a virtual account for traders to practice and learn how to trade. With a demo account, traders can get a feel of the trading platform and its trading tools without risking their own money.
A forex demo account lasts until the trader decides to close it. A typical demo account lasts for one month, but traders have the option of extending it if they wish to continue practicing and learning with it.
Should I try a forex demo account?
Different brokers offer different trading conditions as well, so it’s best to do your research before choosing one.
The other consideration is whether you are looking for a live or practice account. Live accounts allow you to trade with real money and demos allow you to trade with virtual money.
Live accounts are riskier because they involve real money, but they also give traders an opportunity to learn how markets work in a more realistic environment. Demo accounts are safer for beginner traders and don’t require any initial investment.