Why You Need to Trade on Demo Account?
Demo account is very important part of the system when you start learning how to become Forex trader. If you open a demo account, you’ll learn how to trade and without spending your money during this process. Different brokers have different account functionality, but in general all of their accounts imitate live trading accounts.
Some of accounts don’t have trailing stop option or other additional options; and also a limited range of trading instruments.
Forex demo account has also one more purpose. Experienced traders can use it to check new trading strategies, technical indicators and forex robots. Also they can examine their own or purchased software investing nothing. Demo accounts are very valuable for traders who use automated trading advisors on large deposits. Live account testing of such “robots” could be quite risky.
In addition, many brokers offer services like individual consultants, so clients can get online support. Thus training on real examples.
In most cases there is no time limitations for running demo accounts, but sometimes brokers offer 30 business day limitations.
In this article you’ll find demo account functioning principles, its pros and cons. Also you will find out how to open demo account step-by-step.
Pros of Forex Demo Account
The main advantage of demo account is that you can learn forex trading on practice.
You can also develop, implement and test company’s or your own trading systems, advisors and other software that increase trading efficiency.
Demo account owner has no losses; moreover, he can earn money, taking part in different contests and tournaments.
Many young brokerage firms hold such contests and tournaments for demo account owners. As first prize, a winner gets real money (100-300 US dollars).
Prize money withdrawal can be obtained after the trade turnover conditions are met.
Most of brokers offer different types of demo accounts. The main difference is in functioning algorithms that simulate live trading accounts behavior. Thanks to that, traders can learn main principles of order execution, swap charging, spreads etc. For example, on the МТ4 trading platform (the most popular among traders) brokers offer following demo trading account types:
- Demo Fix;
- Demo Pro;
- Demo ECN-Pro;
- Demo ECN-Fix;
- Demo NDD-Pro;
- Demo NDD-Fix.
Bear in mind, that precise simulation of NDD and ECN account types is doubtful.
Cons of Using Demo Accounts
This type of accounts provide no financial motivation. Such way of trading always will be kind of a game or training, despite the level of simulation.
Most of beginners can’t take demo accounts seriously, so it is not efficient to use them. Because even the most powerful simulation can’t give you real taste of victory. Just as you can’t feel despair from your defeat, while using virtual deposit.
Although many books are dedicated to trading psychology, psychological trading aspects are absolutely personal, so there are no precise classifications.
It is widely stated that demo account trading helps you in learning trading on practice, and also gives you possibility to deal with your emotions.
But it is a myth.
Beginners shouldn’t use demo accounts for a long time – it is dangerous practice. If beginner won’t start using live trading account in time, he or she might get wrong impression about forex trading (will consider trading as a game, not a serious issue).
Step-by-step Guide to Opening Demo Account
Forex brokers claim that their demo accounts represent their competitive advantages (and their competitors don’t have such services), and beginners believe in such a mystification.
In real life, almost all brokers have demo accounts. UK and US brokers, that offer services to leading investment funds and other institutional and strategic investors, are the only exception. They are not interested in retail market and additional publicity.
Here you can find step-by-step guide to demo account that you can open on МТ4 trading platform. Other platforms have the same principles of work. So if you read this guide carefully, you will be able to open a demo account on any platform of any forex broker.
Download trading terminal from broker’s official website you’ve chosen. It won’t take long, because installation program is small.
Install terminal on your computer. It is simple. You have to run installation program and choose necessary path to folder.
If you use VPS-server, then you can skip this stage, because in this case you get access code to the virtual computer with installed terminal you need.
Choose “open demo account” option on the page of installed terminal.
Fill out your details in suggested form:
- First Name and Last Name;
- Phone number, email, Skype;
- Demo account type (if broker offers different account types);
- Leverage you want to use. In most cases, leverage could be 1:1, 300:1 or 500:1, but sometimes there are other options.
- Maximum virtual deposit. There are no limitations, but it’s advisable to choose deposit that corresponds to your financial means. This approach makes virtual trading more real, thus it becomes more efficient.
- Login and password to enter trading terminal.
Click “Open” (or “Register”) button. You can use now your forex demo account.