Previous Story
Why You Should Always Start with a Demo Account
When you’re first starting out as a forex trader, it can be tempting to start trading real money right away, however, this may be a recipe for disaster. If you trade real money without understanding how forex trading really works, then the chances are you’re going to make more bad decisions than good ones.
Fortunately, many reputable forex brokers offer demo accounts. These accounts allow you to trade in live market conditions, but you don’t actually risk any money. Instead, you trade with demo funds, which are a good way to learn forex trading without risking your capital. Of course, none of your profits are real either, but the goal is to learn about the markets and to try new things, it’s not all about making money at this point.
Learning the trading platform
For new traders, just learning how to use a forex trading platform can be overwhelming. There are so many charting options, so many different types of trades that you may make, stop losses to place, hundreds of different indicators available, and much more. Just mastering the mechanics may take a good while, and the last thing you want is to make a mistake just because the platform didn’t do what you expected. A demo account is a great way of getting familiar with your tools – and it will also allow you to compare trading platforms from different forex brokers.
Trying out strategies
However, a demo account allows you to do much more than just get familiar with the trading platform. It is an excellent way to try out different trading strategies, and to become familiar with spotting chart patterns and trading signals. You may want to try out many different strategies at absolutely no risk, see how effective they are. Of course, there’s no single strategy that delivers profits on every trade – otherwise everyone would use it – but you will learn over time how to identify high-probability opportunities in real trading conditions with a demo account.
Even when you become more experienced, it’s an excellent idea to still keep a demo account. This will give you a sandbox to try out new things – so that you can continue to refine your trading approach.
A few words of caution
Demo accounts are risk-free, so you may be tempted to throw caution to the wind and go after big wins. However, this is a mistake. You should use your demo account to perfect your money management skills as well, so that you can carry these over when you start to trade real money.
Another problem is that when you open a demo account, you are going to receive a large starting balance – perhaps $100,000. This desensitizes you to trading large amounts. In fact, it’s often better to trade small amounts even if you do have a large demo balance, so that you don’t get impatient with the much smaller amounts that you’re going to trade when you go live.
Finally, no one cried because they lost $5000 on a demo account. Trading real money is completely different – that’s when real greed and fear kick in. This can completely warp your judgment, making you do things that you wouldn’t do on a demo account. Don’t assume that you can just carry over what you do on a demo account into live trading – the pressure will change your behavior unless you make a firm resolve to stick to your strategy no matter what.
The post Why You Should Always Start with a Demo Account appeared first on Forex.Info.
