Practicing on a Forex Trading Demo Account

Practicing on a forex trading demo account can be a very useful and insightful experience. Despite what critics say, demo trading is valuable to wise traders.

Practicing on a forex trading demo account and testing new ideas

Critics of virtual trading argue that using a forex trading demo account robs traders from gaining real psychological experience. Their argument is almost right, except that it fails to address cases where the trader puts new ideas to the test. And uses numbers and in-depth analysis to evaluate their performance. Just like all aspects where simulation is used, such as for the task of training pilots, simulated trading can dramatically improve a trader’s skills. After all, even if one trades with real money, if the account used is of too small size, and the trades microscopically small, it still doesn’t cause the trader any stress. Currency trading is very popular among new traders, and many of them do start out on a forex trading demo account. It helps them shape their strategy much faster, identify shortcomings in their methodology, and just like small size live accounts, it causes little or no stress. Hence the trader doesn’t waste time contemplating open losing trades as far as money is concerned. They are however still, easily disappointed by failure, because every losing trade challenges their skills. Trading is not all about money, but also about vindicating one’s efforts and intelligence as well. Foreign currency trading is open to all. And those who are serious and determined enough will go all the way, from simulated trading through to large size live trading, through clever decisions and paths. Trading is an ongoing test, where one’s skills are tested to the maximum. Any tool which helps get things right, is a nice tool to have, and critics fail to see the big picture. Critics also fail to see that the same psychology gap that exists between demo accounts and live under $1,000 accounts. Also exists between $1,000 and $20,000 accounts. Since to many people $20,000 is a lot of money, and could potentially put them at big stress.

What Forex Trading Demo Account to Use

Any forex trading demo account that meets basic requirements will do just fine. Some traders however prefer online CFD trading to spot forex trading, due to the unique benefits of CFDs. In that case, a CFD demo account must be used, so that traders see how CFDs work, and how they can handle trades, contingent orders and margins. Also for very advanced trading ideas, such as hedged Carry trades, where both currencies and commodities may be used, demo trading can be used very accurately. And of course CFD demo trading can test the whole idea in one account. Demo trading can help spot all the big mistakes the trader is likely to make, all top brokers offer demo accounts exactly for this purpose. Especially for relaxed kind of trading strategies, where liquidity is perfect. That’s where demo trading can simulate a strategy 100% perfectly. On the day-trading and fast trading side, things can differ, but not to a significant extend. If the strategy makes money on the demo account, then it will very likely also work on a live account. It’s all down to psychology and avoiding developing confirmation bias. But the idea of demo trading is a very good one.