Any new Forex Trader is interested to know more about demo account and how to take the best advantages out of a forex demo account. This is one of the things that a forex broker or website must provide to its traders. Many trusted global brokers are now offering their traders a quality demo trading experience. In this article, we will give you detailed information about this demo account and how to use it.
Forex Demo account trading can be considered a more modern version of paper trading. Paper trading involves writing down entries and exits to see how the market performed. They were first introduced by online brokerages in the 2000s when high-speed Internet became more widely available around the world.
Forex Demo accounts have also been used in the US to teach high school students the fundamentals of investing in the stock market. Many schools across the country offer individual investing or economics courses that enable students to hold demo stock accounts and track the progress of their assets over the semester. And thus demo accounts came into the scene.
Advantages of Forex Demo Account
Forex demo account offers traders a lot of benefits some of which are listed below:
1. To test your trading skills
When traders just start learning the art of trading, they make a lot of mistakes. Some of these mistakes may revolve around basic and simple things. However, as simple as they may seem, they can be quite expensive. They can cost the trader to lose significant amounts of capital – some traders might even lose all of their money.
But if these mistakes were made on the demo account then there will be no risk of loss of any hard-earned capital. Therefore, the demo account allows traders to test their trading skills without any risk. Traders can then practice freely, knowing full well that there is no risk involved.
2.To test a broker
In trading, you are putting your capital on the line. To trade, you need to do so through a platform provided by an online broker. Since it is your hard-earned capital that is involved, you want to make sure that the broker you are committing your money to is worth it.
As you may already know, not all forex brokers are reliable or worth trading. Some brokers provide traders with bad trading software which can often run into errors resulting in loss of capital. In addition, some brokers are known to charge high and exorbitant fees and commissions for trades made by traders.
You don’t get to know all these facts before signing up with a broker. However, the demo account provided by forex traders like Traders Union provides an opportunity to learn all these facts about an online broker before opening a live account and depositing real money.
3 To test trading strategies
A trading strategy is a plan that guides a trader to go about trading. The trading strategy acts like a comprehensive guide that instructs the trader what to do as far as the entire trading process is concerned. The importance of a trading strategy cannot be overemphasized. A trader without a trading strategy is the one who goes on a journey without any plan or strategy. Thus, as a trader, a trading strategy is a must. However, trading strategies are not always profitable. Thus, you have to test them before applying them. There is no better place to do this than with a best Forex demo account. If you test them on a Forex demo account, you will know whether they are profitable or not before trying them on a live account.
Looking at some of these advantages, we would surely recommend you to go with a forex broker website which gives you the opportunity of demo trading. This will surely give you an edge over your rivals and will save a lot of capital in the process.