Guide to a Forex Demo Account


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I am sure you have heard of Forex Demo Accounts before. So what does this actually mean?

A demo account is a virtual account which comes with virtual money that can be utilised to make virtual trades with. Demo accounts are usually free of charge and they represent current  market conditions. Brokers usually put a limit to the demo account to around 30 days of use. A good broker may allow an unlimited amount of time for the use of a demo account.

What are the benefits of using a forex demo account?

1. A demo account comes free of charge
Demo accounts do not cost anything. Anyone opening this type of account may find that most brokers are keen to have access to their personal details so they can contact a new account holder and try to convince them to open something called live account where real money can be deposited. This could be the only real cost you may come across during the process.

2. Test and develop a system without risk
Trying to develop a trading plan that suites personal needs is probably one of the most challenging things to do. Demo account structures  will allow you to develop a various range of  trading ideas until you find the one that better suits your needs.  This may include testing  the weaknesses and strengths  of a particular  trading system without putting any of your finances at risk.

Trading Tutorials

Many forex demo account providers offer a wide range trading tutorials, either in video format or in text, which complement with the right education to enable anyone to learn about this type of accounts.

These tutorials are usually provided free of charge. As well as helping you to learn to how to use  a trading platform, they also provide helpful information to assist anyone from a beginner to a seasoned level trading investor, how to develop profitable trading systems and how to improve trading techniques.


The drawbacks

1.     1.  Lack of understanding of some of the potential risks
Been able to trade without risk can definitively be an advantage. However this is easier said than done. Any type of trading come with some level of risk. This is where trading psychology comes in. When your real money is on the line for a forex trading investment it feels very different. A demo account avoids any potential losses, but does not address the issues of dealing with emotions that may be experienced when your account balance is linked to your reals savings account.


2. Lack on money management skills
Usually demo accounts come with a large amount of money already deposited in it. In the real forex trading market a beginner does not have a large amount of money to start trading  with. The amount of virtual money that is usually deposited into a demo account varies from $50,000 to 100,000. Due to the large amounts at your disposal, you can experience a psychological expectation that you will easily profit large amounts of money. This apparent “risk taking” philosophy can maximise excessive risk when you decide to switch to a real live account with real money. The big difference here is that when you lose any money from a real live account that loss is actually for real, and will eventually affect your personal financial bottom line.

When Opening a forex demo account you will learn to trade without putting your money at risk of any real financial loss. This can go to your advantage if you are a beginner. The message of this article is simple: before committing any of you real money on the trading market, make sure that you use a wide range of demo accounts, trial the account systems and practice trading before you start committing any of your real money.






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