What is a Forex demo account? A demo account is an account where traders use virtual mock money to trade in the real forex market. Practicing on a demo account is the best way to gain forex knowledge without involving any risk at all.
Advantages of using a demo account:
- Practice with real market price movements
- Get to know every technical thing on the trading platform
- Access to charts, trading signals, economic news, and more
- The opportunity to test the trading strategy that has been created without risk
Forex trading looks easy but it really isn’t. Everyone can trade forex. In simple terms, forex trading can be interpreted as buying a certain amount of currency and holding it for a certain period of time while the value of that currency continues to fluctuate. When a trader sees an opportunity to make a profit, he sells the currency again.
When opening a trading platform application, in the mind of a trader, questions will arise:
- How to determine to take profit and stop-loss?
- Can you set TP and SL automatically?
- Why do spreads always change?
- How many lot sizes can be traded?
The above questions can be answered when traders practice on a demo account.
Uses of forex demo accounts
The advantage of a demo account is that traders can learn the mechanics of forex trading and test their trading skills without involving the slightest risk.
Traders can open a demo account for free. Although this account is not authentic, all of its functions are exactly the same as real accounts. Investments provide free access to traders who want to test their skills first when trading. Traders can learn the ins and outs of the broker’s trading platform.
Before entering the real world of forex trading, traders must know the concepts that exist in the world of trading. Every day, millions of people trade with the value of trillions of dollars in the world forex market. Forex trading takes place across the country, 24 hours a day, five days a week.
Practice on a demo account can be short terms like 3 months or long-term like 1 year. You have to be patient to practice on a demo account until the right trading mentality is formed in the trader, because when on a real account, traders will experience very different situations due to emotional factors and using real money. Develop a solid and effective system and test it on a demo account before a real one.
Forex trading tip 1: Practice with currency pairs that have USD (US Dollars)
When you start learning on a demo account, start with just one or a few currency pairs so you don’t have to worry about following each one. And practice with major pairs like EUR/USD, because these pairs are the most liquid, which means they have small spreads and there is not much slippage.
Forex trading tip 2: Learn at a slow or medium tempo in order to stay abreast of price movements in the highly active forex market.
At the beginning of learning to trade, traders need to focus on the process of improving their trading skills and creating good habits when trading. Traders also need to gain experience from different environments, then learn how to adapt a method or strategy based on the characteristics of each environment. It takes hard work, dedication, patience, and good decision-making to be successful in forex trading.
Frequent practice with a demo account, traders will learn how to set targets. Target means the amount of money that will be issued and can be released in the event of a loss because the price movement is not in line with the trader’s expectations. Using a demo account for a certain period of time can allow traders to master when is the right time for market entry and exit and also shows how often the market price moves. Traders can learn when is the right time to exit order and use take profit and stop loss efficiently.
Learning helps a lot, but having experience is something that is irreplaceable. So having theory alone is not enough, it takes a lot of practice to be able to master trading. After the trader has sufficient flying hours and often achieves consistent profits, the trader can start trading on a real account. Traders who have just opened a real account can start trading with a mini account to test it first.