Demo or simulated trading has been available for a while now. But it’s become easier and easier to access free forex trading demos as forex brokers compete for business. And whether you have a $500 or $5,000,000 starting capital, trading and testing using a practice account is a valuable exercise.
Get accustomed to trading and execution
The thing is, it’s a bit like right before you learn to drive – it looks easy and feels like it you’ll just be able to drive. But under pressure it can be far more difficult to remember to check some other market or place your stop correctly if you haven’t experienced trading before.
Trading a demo account allows you to get used to the feeling of trading and helps you to familiarize yourself with a platform without the need to risk any of your starting capital.
Test a system
Demo accounts aren’t simply something that you use before you’re making money and then forget about – they can play an important role in developing a new plan. If you’ve come up with a new strategy or EA that you’ve never traded before, developed some new money management techniques you want to try out or simply feel that your strategy could work well on a different market, it’s great to test your ideas out on a demo account first.
Free forex trading
The fact is that there are so many great places you can get a high quality and real-time free forex trading platform demo account. Many if not most, tend to be in the form of the widely used Meta Trader 4 (MT4) platform. The added bonus of this is that many forex brokers also offer CFD trading so you have access to trading other markets such as commodities or stock indices too.
Dangers of demoing
As helpful as demo trading can be, it’s also possible that it can become extremely counter-productive. Not treating demo trading as a serious exercise in preparation is often the root cause of the problems that new traders encounter. Leaving out important performance factors when assessing results such as not taking planned stops, can dramatically change the results that are subsequently achieved when trading a live account.
But also, trading a practice account for too long can lead to picking up bad habits. Taking unplanned trades, trading different markets, doubling up on size when the market goes against you – all of these can be hard to shake.
However, the bottom line is that if you do treat it seriously, demo trading can be a valuable tool in your development as a trader and the development of trading strategies.