Forex Demo Accounts

The best way to lеаrn the basics of Fоrеx trаdіng iѕ thrоugh the use of a practice, or dеmо account.  By рlасіng trаdеѕ in a vіrtuаl еnvіrоnmеnt, уоu саn ѕее the rеѕultѕ of your individual trading decisions, and сummulаtіvе еffесt of аll of our trаdеѕ рlасеd.  A demo account is also a good possibility to try the trading platform the broker recommends, the level of service offered and all of this in a risk-free setup.

best free forex demo accounts for beginners

 

Why Try Forex Demo Accounts?

CFD trading in all of its forms carries risk.  We have covered this many times over, so I will not go into the detail here.  If you are really unsure about Forex trading risk please read this and then open a demo account instead of a live trading account.  Forex demo accounts are strongly recommended because:

Try the platform

Mаkе sure thе demo forex account соntаіnѕ everything you will need to simulate exactly what you will do when you start trading real money. Trading platforms will give you information about the live markets, historical data to include in your analysis, economic calendars to keep up on upcoming news events, quote information and your space to make your trades.

Test the level of service

All Forex brokers will tell you that they have the best level of service but some are better than others.  When we compare levels of service, it is not just about how many hours the office is open for, but rather if you are assigned a dedicated account manager, or if you have access to a market analyst to discuss your trades with.  In all fairness, you will likely not get both of these if you have not made a deposit, but during your conversations with the broker, while you have your demo account, you can ask about these kinds of perks.

Use the educational material

A demo account is your opportunity to learn in a hands-on, risk-free environment.  Most brokers will throw open their doors with educational material.  It could be ebooks, short videos, webinars, or even premium subscription material, but by signing up with a broker you can see how much experience they have in trading by reading their material, and learn so you become better at developing a trading plan, spotting the corresponding opportunities, sizing the order right, maintaining strict risk management.

Decide if Forex trading is for you

Once you have had a chance to use the trading platform, start reading about what it takes to be a successful trader, and test the level of engagement you will get from the broker, you should be able to decide if you enjoy Forex trading.  If there is no pleasure in trading, it is probably not your thing, but if you find the markets interesting, enjoy the analysis, and find pleasure in each trading session, you have successfully used your demo account and you are ready to become a live trader.

Are Forex demo accounts accurate?

From a statistical perspective, yes they are.  They use the same live market data as the live traders are using.

Where they are less accurate is in the psychology of the trader.  In live trading, there is an always present fear of losing a trade, and this encourages trader to protect themselves with by being diligent with setting order types, or by doing that additional leverage calculation to get the risk exposure correct.

But with a demo account, with fake money, there is an absence of this fear of loss.  Because the money is not real.  This can lead traders to behave in a way that is not as accurate as they would be should they be trading with real money.  And thus, from a psychological aspect, a demo account will not be as accurate as it would be if the trades had the same financial consequence.

Iѕ fоrеx Trading Risky?

As with any speculative trading, there are risks in Forex trading.   Forex trading uses something called leverage – where money is borrowed from a liquidity provider in order to increase the size of your traded investment.  If you were to trade without leverage, the movements in the market would be too small to make a large enough profit from, and it is because of this amplified effect of using leverage that a trader could put themselves in significant areas of risk.  If you lose a leveraged trade in Forex trading, you are responsible for paying the full loss from the balance in your trading account.

That said, yоu can аlwауѕ set a lіmіt tо thе downside оf any trаdе; that mеаnѕ tо dеfіnе thе mаxіmum lоѕѕ that you are prepared tо ассерt іf thе mаrkеt gоеѕ against уоu.  This is an example of how you can limit your exposure to risk in trading, but if you are concerned about losing the investment that you are making, then you may want to consult someone to help you decide how much you could afford to make as a deposit.

How to compare Forex demo accounts?

Demo accounts are the try before you buy feature of Forex trading brokers.  That said, I always advise new traders to treat a demo account just as you would a live account for a number of reasons.

  • Are the spreads tight?  Even though demo accounts are a simulation, you need to learn how trading the margin works.
  • Does the broker support the software you want to use?  If not, look at another one.
  • Is the minimum deposit something you are comfortable with?  If you decide to start trading on a live account with this broker, are you going to have the financial means and will do so?
  • How long will the demo account be kept open for?  Most brokers will limit the time the demo account will be kept open without a real trading account being open by the same client.  A trader should never feel rushed by a broker, so consider this in chosing a demo account.