Forex trading provides vast profit opportunities, but it is definitely not a get-rich-quick scheme. Just like other investment models, it takes some time and skills to actually earn money. A colossal mistake that many newcomers make is open a live trading account and use real funds to begin trading, before they are really ready to do so. This is just a quick formula for losing their hard earned money. It is always advised to put a damper on your excitement and practice trading before placing real trades. The funds you save will be better leveraged, once you have obtained some experience and skills.
Forex trading is not the kind of endeavour that allows people to just jump into lightly. Even if you think you are adequately prepared, it seems to become more real once you actually engage your assets and send a real trade to the market. In order to gain some trading competence and make profit, practice is a one way street.
Forex Demo Account
You might probably wonder which the best way to get into Forex is, without risking any of your funds. The answer is simple; practice on a demo account! A Forex demo account is a practice account that is set up in the exact same way as a real trading account, with the exception that the money in the account is not real, but virtual. Placing a demo trade completely simulates the technical aspects of Forex trading, as the charts and trades are connected to the real market. The account allows novice or seasoned investors to test their trading skills and techniques in real market conditions, with a zero per cent risk and no commitments attached.
A Forex demo account can be just the thing you need to safely kickstart your trading career and you should take it as seriously as possible in order to get the most out of it. Having a target to work with will make you much more serious about it and enable you to learn the trading skills you need to become proficient in a much more timely and efficient way. The better your trading skills with monopoly money are, the better your skills and confidence will be when it comes to start making real money.
But what are the reasons that make practicing on a demo account so important?
Learn the trading platform
One of the main reasons why demo trading is so essential, is because you have to fully grasp the operation of the online trading platform before start trading for real. It is quite easy to make a mistake if you are not familiar with some of the tools and features of the platform. Investors that are new to the market rarely have a clear idea of how it functions, thus it is always wise to first test all the bells and whistles on the trading platform before attempting to place a trade. Aside from learning the technical aspects involved in trading, you may discover some ideas that will help you become more profitable, as many Forex trading platforms include a large array of tools to help you get the job done in the most effective manner.
Have a close look of real market conditions
It is very important for traders to prove themselves in a market simulation environment that they have the attributes needed to make money online. It is one thing to examine the charts and indicators, but you also need to get into the habit of feeling the market, as it is a unique living entity, providing new excitements every day. There is great value in practicing under real market conditions, so you can get a handle on how trades work and how financial instruments react when the market makes sharp moves in either direction.
Test Forex trading systems
One other particularly good use of a demo account is to test out Forex systems and trading strategies. If you have a good idea for a system or want to experiment with a new strategy and you want to see how it would work in real time, a demo account provides the best venue to do that, as it gives you the ability to test your ideas without risking a penny. Even if you are an experienced trader, you will still want to expand your list of techniques and strategies. It is, therefore, always recommended to take your time to work out the details and practice your ideas before start using real money.
Learn how to manage your funds
There are those who argue that they do not like to practice on demo accounts, because they do not like fake money. This is similar to the logic of fire drills. Let’s assume that you all had fire drills at your school when you were kids, despite the fact that there wasn’t a real fire. You may have made fun with your schoolmates during the drill and even moved slower knowing that there wasn’t a real fire out there. But what if a fire was about to burst out in reality, would you know what to do? Would you know where to go and the tempo you should walk in order to safely exit the building?
Well, this example demonstrates why you should practice on how to manage your funds. In order to begin trading for real you should learn how to effectively trade with margin, get accustomed with estimating profit and loss, assessing your risk reward ratios and be able to make the best decisions when the market moves against your position. When you practice trading, you can learn vital lessons about effectively managing your money and also discover your own trading idiosyncrasy.
Moving to real trading…
Once you have dedicated some time to practice your trading systems and you feel comfortable, you can consider opening a real trading account. You do not have to be worried about losing time in real trading, as the benefits derived from demo trading pay for themselves over time by enhancing your earnings.
Here, at TeleTrade, we offer completely free of charge demo accounts to get you started with your Forex and CFD trading, as well as localised customer support service to assist you with all your queries along the way.