Why Use Demo Accounts For Practicing Your Forex Trades?
“To demo or not to demo?”, this has always been a debate amongst the trading community. Should you really spend three or more months trading through a demo account? Definitely. There are numerous advantages to using a demo account to practice your Forex trades. Here’s 5 main reasons why you should use demo account for practicing Forex trade.
It’s Easy and Simple
Opening a demo account is straightforward. You visit the broker’s website and download the software. You are then sent an email containing your username and password. On the login menu, you simply click Demo when asked what type of account you are using. This is more or less the process new traders have to go through to open a demo account. There is no need to send specific documents like pay stubs and photo ID copies, which is commonly required when opening a live account.
It Familiarizes You to an Actual Trading Platform
The trading platform you use on your demo account is identical to the platform you will be using for a real account. Of course, there will be limitations as to what currency pairs you can trade, how big positions you can control, and what educational materials you can access. Interface-wise, however, you’ll be viewing charts, implementing technical indicators, and accessing data feeds the same way you’d do so in a live account.
It Prepares You Mentally
When you use demo account for practicing Forex trade, you are subconsciously training your mind to familiarize itself with how prices move and how a loss or profit affects your way of thinking. Ideally, you should strive to make trading an emotionless activity. You should neither celebrate profitable trades nor weep over losing trades. Through a practice account, you experience these feelings without having to expose real money to risk. If you get angry or depressed because of a big loss on a practice account, then it should signal your unpreparedness for managing a live account.
It Lets You Test Out Systems
Whether you’re using a trading system you’ve built from the ground up or adopting someone else’s, having the freedom to test out the profitability of the system over a long time period is essential to success. Practicing your trading system through a demo account provides a risk-free medium. Using a demo account, you can also tweak the respective trading system to increase profitability or decrease risk.
It Teaches You a Ton of Things
The best way to learn is through firsthand experience. Sure, you might have heard how to trade a trending market or how to use Fibonacci to map price levels of interest. But until you actually get to trade through a legit trading platform, you will never completely know how to trade Forex. Absorb as much as you can from your demo account and try to turn them into habits that will help you profit over time.
Once you’ve taken as much information and skill from a demo account, consider opening a live account with minimum capital requirement.