The Importance of Using Forex Demo Account

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Published on May 21st, 2015 | by Joan Makai


Trading in foreign exchange or Forex is more rewarding than trading in stock markets. Unlike stock markets, the foreign exchange markets remain operational 24/7, 365 days. Corresponding losses can also be enormous. People at least know what a joint stock company is, and there are required mechanisms to control frauds. But Forex trading has no such authorities overseeing the process. Therefore, the exchange rates primarily move based on demand and supply of the currencies at that particular moment. There are Forex trading strategies that are time tested. Technologies have now added enormous speed to calculations for gaining in Forex markets. Periodically, new strategies also keep surfacing, which are valid for a short period. These existed before, but back then, it was not possible for traders to cash in on such opportunities because of the inadequate speed in Forex transactions. Software programs are now available for helping traders make the most of the opportunities that Forex market offers.

 

Why a Newbie should Use Forex Demo Account?

But not all Forex trading software programs are alike. They should not be too. Different people are willing to take different levels of risks. Therefore, the selected forex trading platform should necessarily be suited to the level of risks a person ready to take in this market. But how does a trader decide which FX platform is more suitable for him or her? The answer is by using the forex demo account that is integrated with most of these FX platforms.

FX platforms usually come with tutorials that explain foreign exchange trading to new players in the market. Most of these platforms also have demo Forex system with Forex demo accounts. Therefore, the buyer can practice trades on this demo program sub-routine and gauge his or her comprehension about such trading as gleaned from tutorials and other sources. The demo version often includes live streaming of Forex live prices.

The trader may also need to be familiar with essentials of Forex market such as how to place any stop loss or limit order, how to match and mix lot sizes, how to set a stop, etc. The terminology differs from that in stock markets, but there are similarities as well in some of these transactions. Without practicing on the demo, the Forex trader may not be able to execute desired trades in time, and, therefore, earn small profits because time was wasted in searching and studying relevant feature. By practicing on demos that come along with FX platforms, the trader becomes adept in searching the required features and placing the necessary orders, in real time. The speed of giving orders is crucial in these markets.

Since the FX platform automatically calculates the currency values at any point of time, the trader does not have to do much even in the demo mode. All graphs, currency values, currency pairs, etc., can easily be seen on the screen for a trader to take a quick decision. The demo account is integrated with any FX program also gives an idea to the trader how much he or she is earning on each trade, and with different strategies. But it is not necessary that all Forex demo accounts are integrated with some FX platform. Likewise, it is not mandatory that the user should buy the program after using its demo account. Usage of these demo accounts is usually free.

Tax planning is an important aspect of any Forex trading. Therefore, the FX platform that is being purchased should be able to provide details of all transactions in any year for calculating taxes on them. Correspondingly, the demo version also gives the trader the same advantage by keeping records of all trades. These records indicate which strategies work, and which fail giving trader an understanding about mistakes possible in this market.

Currencies used in these accounts are also virtual currencies. Therefore, the traders can afford to take more risks and study the trades in depth because they can keep on practicing on such demo accounts for unlimited transactions.

 

Conclusion

Forex Demo accounts are almost hands on experience in the Forex market, giving a newbie trader an idea whether he or she is equipped to handle the speed of transactions in real market, and the kind of trades that are more suited to him or her. Therefore, a trader may be able to decide whether he wants to trade frequently or hold on the currency pair for longer. By using these accounts, new traders in the market become familiar with the platform and are able to derive maximum benefits from it in due course.

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Joan Makai



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