Demo Forex Trading Account - Currency Trading Practice Account
Before beginners can start trading the real currency market, a beginner should look for a Forex trading practice account which is commonly known as a Forex demo account. This practice account is provided for free and therefore also referred to as free Forex demo account.
This demo account is provided to beginner Forex traders for the purpose of practicing their FX strategies and techniques as they learn how to trade the online foreign exchange market. This will also allow the beginners to practice on the trading platform known as MetaTrader 4 software until they become familiar with its operation, the execution of trades using this software and how to navigate the platform and the currency trading charts that are within the trading platform.
To start learning, beginners need to start with a demo Forex account, these are similar to the real Forex accounts in terms of the actual Forex software as well as execution conditions, the only difference is that a one does not need to deposit any money when it comes to the FX demo account. The money used is virtual currency, and it is not real; it is used to simulate real money trading without risking money.
Online Trading Practice Account - Learn Forex Trading Software with a Free Forex Demo Account
The trading demo account will have a virtual balance of $5,000 or $10,000 or $50,000 or $100,000 and a demo trader can choose the amount of capital they want to practice trade with. The example shown above the virtual balance of $100, 000 as shown above on the MetaTrader 4 Transaction Window and a beginner can use this $100,000 dollars virtual balance for currency practice trading.
Remember the Forex trading demo account is a free account and because learning Forex may take some time, currency brokers provide this as a way for beginners to study Forex trading and start without depositing real money.
Beginners should also look for an unlimited time practice trading account to ensure that they get enough practice time until they are ready to invest in the live market.
The main purpose of this demo trading account is to allow to beginners access the real foreign exchange market as other currency traders participating in FX with real money, only that the difference is that the funds used are virtual funds that are risk free, but everything else, from the platform software, order execution, spreads and currency price movement are the same as those transacting the live market.
As Forex popularity grows and more financial instruments are introduced to be transacted alongside FX, these demo Forex accounts can also be used to practice on these newly added financial instruments.
Commodities: GOLD and SILVER
Futures: CORN, WHEAT, SBEAN
Energies: NGAS, OIL
Indices: DOW, NSDQ, SP, NK,DAX, FTSE, SMI, ESX50 and CAC
These financial instruments that are also gaining popularity in the online spot market, can now also be transacted on the online trading demo account. These instruments are popular because they are used to hedge currencies as well as provide additional financial instruments that can be used to diversify the portfolio of investors. These instruments are traded like this; when there is no enough liquidity or volatility in Forex then investors look for this liquidity and volatility in these alternate financial instruments. Their popularity also means that these instruments have also developed trends that can be analyzed just like the trends found in currency pairs. Among the most popular is Gold and Oil.
This type of account is meant to serve the following purposes:
Learn FX Platform
The first thing that a Forex demo trading account is supposed to do or is supposed to be used for is to study the ins and out of the Forex software that your broker uses, a good example is the MetaTrader 4. Once you register for a practice account with a broker and download their software, you will need to train on how to trade currencies using the platform you have just downloaded. Learning to operate this software is especially crucial for beginners with zero knowledge of the foreign exchange market. If a beginner were to start directly investing with real money without knowing the working of a platform they can easily make a mistake by pressing the wrong button or placing the wrong order by mistake without even knowing.
Learn FX Execution and Setting Orders
Beginners will not know the difference between a limit order and a stop order, beginners will also not know when to buy or sell or which currency to buy and which one to sell especially considering the fact that currencies are transacted in pairs and buying one currency is also the simultaneous selling of another, a concept that can confuse a beginner, therefore the need to start with a Forex practice account until the time a they get to know which currency to buy and which to sell and when to sell.
Test Your FX System and Strategies
A demo trading practice account is a perfect ground for testing your Forex trading system and strategies, As a beginner the first thing you need before you start is a system that is based on FX strategies. After coming up with your trading system you will use this account to back test it or what was anciently known as paper trading, this is similar to the paper method only that it does not use pen and paper but the method of back testing is what is similar to that of paper method.
Until the time you start winning more on your practice trades only then you can then look to invest in your real account. Starting with $1,000 dollars or more is recommended, it is best to save your money up to at least $1,000 dollars that way you have a fair chance of succeeding as you will not make the number 1 mistake in Forex: under capitalization. In fact the more money you invest with the better, start with $5,000 dollars, that's better, $20,000, you are now getting there, $50,000, now you have aligned yourself with the best odds.
Ask yourself why most free demo trading accounts are set at balances of $10,000, $50,000 or $100,000 because this is the amount of capital that will give the investor the best chance to succeed, because they will not be under capitalized.
Forex Trading Practice
This free practice trading account is a type of account offered by online brokers as a way to introduce beginners to their currency software and methods of execution. This where you Forex practice until you the time you can make profits and then afterwards you can trade the live exchange market.
This is a great way to get started and learn the specifics of online trading with no risk of losing money and at the same time get to know the execution methods of orders and test various strategies for free.
Using a practice Forex account is the best way to gain knowledge and to help in the understanding of the actual trading process. A good software is the MT4 which is simple to learn, the MT4 tutorial is also provided here at this Website, under the right menu and top navigation you might want to read the tutorial before opening a platform.
By using a currency trading demo accounts, a beginner has the opportunity to learn executing transactions without risking their own money. The broker will set up a practice Forex trading account for you for free so that you can test their Forex software, their execution - execution is considered by most investors as an important aspect when choosing a broker, No Re-quotes Execution is the best execution method, many requotes will mean sometimes investors not getting their orders executed, or if the orders are filled/executed they will be executed at a price that is not better than the one previously quoted plus the fact most people just hate being requoted. Imagine trying to place an order instead of the order getting executed instantly you get requoted, then you have to place another confirmation order, if you get requoted 5 times you will have to place 5 other confirmation orders, plus the original order. A No-Requotes Policy for order execution is the best option to choose from.
There are many advantages, the biggest advantage is having the time to figure out how each platform works, how to navigate it and know what each function does. On top of that you can test your strategies to see if they work before switching to the real market.
Many beginner Forex traders find that by putting the knowledge in this site to work on a free Forex practice account, they get a clearer understanding of what to look for before, during and after each transaction. These topics are aimed to teach every aspect of FX, most beginners just learn about; a Forex trading system, how to generate trading signals and then start investing on the real market, well it takes less them less than a month to lose their invested capital. After all they did not study about money management topics under key concepts tutorials, neither did they read about draw-down and maximum draw-down, and the best of them all LEVERAGE. If you have no idea what leverage is don't open a live account until you do.
Even the experienced currency investors will also test the Forex demo accounts of other online brokers, especially if they want to change their broker. This is done so as to help them get to know about the execution of the new Forex broker and also study the new software. Nowadays most people just learn one platform, the MT4, which is given by all brokers so when an investor moves from one broker to another they will still use the same software without the need of learning a new Forex software all over again.
The purpose of the FX trading demo is to familiarize the beginner with the various methods of analyzing price movements and order execution it provides beginners with examples of how the market works without the risk of losing cash. One can also learn how to execute orders and how to analyze currency pairs and when and how to open a transaction, how to read a currency quote, navigate price charts so that they master the various transactions before progressing to the live market.
Looking at the chart below a beginner would not know how to trade or execute a transaction if they were to start investing immediately. A beginner would almost certainly lose their money because they will not know what they will be doing. This is why all beginners start with a Forex trading practice demo account provided for by their broker for free so as to practice risk free before opening a live Forex account.
FX Practice Account - Learn Currency Charts using a Practice Forex Trading Demo
Learning the broker’s software
Because different types of platforms are provided to investors like the ones listed on this page; all brokers will have demonstration accounts with which one can use to learn the new software and about the various tools provided.
Web Based Platform - Traders can learn this software with a Practice Forex Free Demo Account
Looking at the above example - one would require to familiarize themselves this new software afresh before starting to use this new platform - an investor would then open a Forex demo trading account and use it to learn the new software.