What is a Demo forex account?
What is a demo account? How do I open a demo account? What are its advantages and disadvantages? You will find answers to these and other questions in this article.
Good day, ladies and gentlemen traders. Practice is the key to success in every aspect of life, and trading is no exception. Trading on real accounts by professional traders looks simple and clear, although it requires great dexterity, but in the eyes of beginners it seems difficult and risky. So where can I learn how to trade Forex without experiencing the consequences of risk? That's right, on demo accounts! Today you will learn what a demo account is, how to create a demo account, what its advantages and disadvantages are, and where you can open a demo account.
What is a demo account?
A Forex demo account is a simulator that generates real-time trading on virtual platforms. On these platforms, you work with virtual money and do not risk anything. Along with novice traders, even professionals from time to time use demo accounts to develop various strategies and test them. Without the risk of losing capital, traders are free to learn and gain trading experience.
Demo account features
With the demo platform, you can take part in simulated trading, which was developed specifically for real-time trading training. If you practice on real transactions, you will be exposed to severe risks and constant fear of draining the Deposit. Although this fear is natural and understandable, it can have negative consequences for a beginner. Demo accounts provide a safe learning environment without fear of any consequences from your actions. Here are some of the many features of a demo account:
- Graphics. Learning graphs is incredibly importantabout when trading currency pairs. Without knowledge of the various trends observed in the market, it will be impossible to find the most profitable trend. Demo Forex trading will help you learn how to interpret charts using indicators and implement various charting tools;
- Analysis of trading instruments. Indicators for technical analysis and other trading tools will be of great help in trading. These tools help you determine the best entry point for a trade, and Forex demo accounts will help you get used to these tools;
- Market research. Indicators will only be useful when you can read the markets. Without knowing the basics of candle analysis, it will be difficult for you to get used to Forex. However, with a demo account, you can quickly master these nuances;
- Testing market trends. Currency pairs behave differently in different market conditions. Some currency pairs show a good profit in the London trading session, others – in the Asian session, some instruments may be in a trend, others at the same time move in a sideways corridor. Practice on Forex demo accounts will help you easily understand this difference and learn how to use it in trading.
See also which Forex brokers offer Deposit bonuses.
Advantages of demo accounts
When you first start trading, you don't know much about Forex. Trying to extract experience from real transactions will not only not serve your goals, but may also cost you a Deposit. Demo accounts will allow you to get:
- Risk-free experience. There are no risks on a virtual account with simulated money. Thus, mistakes made on a demo account will help you not only learn how to trade, but also avoid them in the future on a real account;
- First-hand learning. Forex trading is not an area that can be covered only by reading books and by watching training videos, hands-on training is of paramount importance. Demo accounts will allow you to get acquainted with the markets and learn how to speculate on market patterns that will eventually get in your way. Along with this, demo accounts will also allow you to learn how to develop trading strategies and expert advisors;
- Testing the quality of the broker. One of the best advantages offered by the demo platform is the ability to test the quality of service of the broker. With a demo account, you can check the effectiveness of their software and what trading conditions they provide.
Disadvantages of demo accounts
Although demo accounts are designed to improve the trading experience, they have some drawbacks:
- The lack of effects in real time. Demo Forex trading provides a virtual environment for trading virtual money. This environment is strongly opposed to real-time transactions. The lack of risk prevents traders from coming to terms with the fact that one wrong move can completely destroy their trading;
- Unlimited investment. On demo accounts, you can start each trade with a million dollars, because this is virtual money. Can you do this in real trading? Most traders will work with a small amount of capital on a real account, and the slightest mistakes can lead to its complete loss;
- Lack of emotional preparation. Dealing with risks, losing money, and trading in real time all have huge emotional consequences. Fear, greed, or excessive self-confidence can lead to the loss of the Deposit. Learning to deal with these emotions is just as important as learning to trade, but demo trading will not allow you to do this, as it dulls these emotions.
How do I create a demo account?
Creating a demo account is very simple. To do this, you need to pass a free registrationwalkie-talkie demo account with your chosen broker. You can choose the type of trading account (cent or classic, floating or fixed spread, ECN account), the amount of leverage and the Deposit balance. You can open an unlimited number of demo accounts under various trading conditions. Some brokers offer to create a demo account without registration. This usually applies to web terminals. In addition, many brokers (such as Alpari) run demo account contests with real cash prizes, so you can earn money without risking anything.
See also what brokers exist with a no Deposit bonus.
Thus, a Forex demo account is a great opportunity to get an invaluable trading experience without the risk of losing your Deposit. You can also use demo accounts to develop new strategies and expert advisors. However, demo accounts have their drawbacks. The longer you trade on a demo account, the more difficult it will be for you to switch to a real account. It's all about emotions. As long as you trade on a virtual account and don't feel a sense of risk, your emotions are dormant. But once you switch to a real account, your emotions will take over your experience, and you can quickly lose your money. The most optimal period for testing the strategy on a demo account is 6 months, then you should switch to a real account. The transition process should be slow. Start with small trading volumes, even if the Deposit allows you to trade large lots, and strictly follow your money management. In this case, you will not only get trading experience, but also learn to control your emotions.
Read also the article " which timeframe to choose for Forex trading?».