Forex demo account is one of the best learning, practicing, educational, informational, and even entertaining tools that every newbie trader can use for his advantage. Sometimes, beginning currency traders underestimate the usefulness (and I would say, the necessity) of demo account trading.
A demo account can be opened with almost any FX broker and in 99.9% of cases it is completely free. In a demo account, one can trade Forex with the virtual money, doing exactly the same things that one would do on the real account but without risking any real money. The advantages of the Forex demo accounts are tremendous:
- It is free. You do not have to deposit anything or pay any fees to open a demo account with the vast majority of the foreign exchange brokers. And in the case when you do not know whether Forex trading is a right thing for you at all, "free" is the synonymous for "great"!
- Practice trading. With your free demo account, you can practice your trading skills, develop new strategies and learn new things about currency trading. That is possible because all currency pairs behave equally on demo and real accounts. The only difference is the virtual vs. real money.
- Get to know the broker's platform. With a demo account, you have the access to the broker's trading platform, which you can test before moving on to the real account. And this can be very useful, especially with the exotic trading platforms.
- Free charting tool. Even if you do not plan
to trade with the specific Forex broker, you can always use its demo
account to have a free access to their trading platform's charting
tools. That can be very useful when your real account is set
at the broker with a
not-so-good platform.
Those are the advantages of Forex demo accounts. Of course, it is necessary to say something about the caveats, but the biggest thing about the demo accounts is that they are free, so, we can always close our eyes on their disadvantages without any damage to our purses.
- Execution may differ. Unfortunately, many brokers have an ideal execution (no slippage, no requotes, and no market delays) for demo accounts and a real execution (with some of the mentioned unpleasant things) for the real money accounts. You should understand this when moving from demo to real.
- Some demo accounts expire. Some Forex brokers make
demo accounts expire after 30 days or similar period. Of course, you
can always open a new demo account, but all your stats and positions
will be lost. Just try to find a broker with
non-expiration demo accounts. - Emotions are different. The psychology of Forex trading is very complex. When you trade on a demo account using the virtual money the loss will not frustrate you much and the wins will not get your heart beating like crazy. On the real accounts, emotions play a huge role. You should keep in mind that you will have to adapt your trading psychology from demo to real at one point.