Currency trading is on a lot of people’s minds lately. In part, this is due to the boredom that comes with the lack of social activity. After all, we’re still in a pandemic.
On the other hand, people also look for alternative ways of making money. The pandemic has shifted the focus on the online environment and online businesses. Given this, the number and value of daily forex trades have increased significantly in the past couple of months but it is good to demo your trades before investment.
So, how does one properly learn to trade Forex without endangering their funds/savings? The short answer is with the help of a Forex demo account. Let’s see what this is and why you should use one!
What is a demo account?
If we take a look at brokers such as IQOption and many others, we’ll notice that they provide traders with a free forex demo account. However, this account’s nature is not the same as that on social media, so to say.
Once you start trading with real money, you don’t lose your access to the demo account.
This is because a demo account simulates a live trading environment where the trader can trade with virtual (not real) currency. This allows traders to get familiarize themselves with the market and even do some research for future trades.
As we all know it, knowing all the theory is the key to success. But it still lacks one essential ingredient – namely, practice.
This is precisely what demo accounts offer new traders: the opportunity to practice without risking anything. For example, a former marketing student that wants to open their own business won’t have the possibility to do a test run. They will learn from their mistakes – but those mistakes will cost them real money.
A forex demo account will also have traders learn from their mistakes, but everything they’ll lose will be in a virtual and insignificant demo currency.
Getting accustomed to a trading platform
Even professional traders may have a use for such demo accounts. For example, the most popular forex trading platform is MetaTrader 4. Old-school traders are likely to be accustomed to this platform only.
As such, when trying another broker that operates on another platform, they may have a hard time getting used to it. For this, these can use a risk-free demo account until they learn the ropes.
Trading with virtual currency implies no actual losses. However, as a trader, you’ll feel moody even when losing that type of currency.
Demo accounts help you prepare and manage your emotions for the real, live trading. You’ll get used to winning large amounts of money as well as losing almost everything you have.
Develop trading strategies
We mentioned above that a demo account could be used as a test run for your future trades. Therefore, it can also be used to develop strategies that you want to apply to your live trading account.
Since demo accounts use the same market data as the live accounts (in most cases), there will be little to no differences between the trade you make on your demo account and the trade you make live.
The bottom line
Forex demo accounts are what brought so many people to the currency trading world. In fact, some brokers even allow traders to convert a percentage of their virtual currency to a live one if they manage to win a lot of trades.
Some may believe that demo accounts are only meant to convince the trader to try live trading. However, real traders know that a demo account will teach you, a beginner, more than any theory you read!