By Vytautas Zilenas
Most brokers allow their customers practice their trading skills on a free forex demo account before opening a real account. In fact, in some companies you can play with fake money as long as you wish by opening a different demo account after the previous one expires. This has both advantages and disadvantages for a trader. In the article I will try to look at positive and negative aspects of practicing forex trading on a demo account.
Advantages
1. Forex demo allows you to test your trading strategies before you start using them with real money. You never know if your trading strategy is going to work before you have back tested it under real market conditions. So, having a demo at your disposal you can run as many tests as you wish and burn as many demo accounts as possible before deciding which trading strategy works and which does not.
2. It allows you to find out which forex broker you like most. Different brokers have different trading platforms and some of those platforms might fit your taste while others will not. I would advise you to avoid complicated ones as you might experience serious problems due to the complexity of a platform. Once, a friend of mine had an order open with 1 standard lot with one of the biggest forex brokers. When he tried to close the order somehow the system opened another one, instead of closing the first one. So, he had two standard lots open on an account with 2000 dollars deposit. As you can imagine he felt scared. He had to telephone the company and with some help the problem was solved. Luckily for him there was no fundamental news around. He could have lost everything in a matter of seconds. Therefore, I advise choosing only those brokers whose platforms are easy to use.
3. Forex demo account gives you an opportunity to practice your trading skills under real market conditions without losing a dime. Trading on a real account is a stressful experience in the beginning and if you are not absolutely sure what you are doing you can kill your deposit in no time. Demo account helps you to trade as long as you feel comfortable with your trading style, strategies and results. Then you can switch to real account.
Disadvantages
I thought of the points that I could write under the section and decided that I could put all disadvantages into one paragraph. Forex demo account does not allow you to experience real psychological states that you are in while trading a live account. It does not allow you to lose any real money of yours. It can lead you to self deception as you can burn as many demo accounts as possible while practicing your trading skills. You will not be able and you will not be willing to do that on a real account. Practicing is not real trading and real trading can only be learnt trading a real account with your real hard earned money.
About the Author
I have been in forex trading for more than six years. If you want to find you more about currency trading I recommend watching my video about forex trading strategies.
