By M Richter
Thousands of potential forex traders and investors try out forex demo accounts to determine if forex trading is truly for them. A demo account allows a person to go online and see exactly how a real trading account would work. It’s somehow similar to the war games played by generals in the Pentagon. Any investor can pretend to have money in an account and buy and sell the same way it would be done in reality, without investing or risking any real money. These demo accounts use very realistic software that displays transactions reports showing losses or gains as if the transactions had been real.
The system works in a very simple way. An investor pretends he has a margin account with ten thousand dollars in it. He looks closely at the currency markets and forecasts that the dollar will go up in value against the japanese yen. Using the demo account he buys at a ten to one margin, so he buys (in the program) one hundred thousand dollars of dollars and sells one hundred thousand dollars of yen. There will be a spread, or difference, which amounts to the pretended profit.
Why would someone want to use a demo account? The main reason is because it is always much safer to learn how to do this sort of thing without having actual money at risk. The same principle applies when kids in driver’s education classes sit in demonstrator modules that resemble real autos. They are able to practice driving without taking risk. They are able to maintain their safety while they build their skills, knowledge and confidence. Pilots follow this same idea when using flight simulators. No one would ever think of flying an airplane unless sufficient time had been spent in a flight simulator first. The same holds true for forex trading. Spending some time with a demo account allows the potential trader to gain skills and learn the ins and outs of the market place. A person is then able to see if they truly have the instincts necessary for the market and have sufficient knowledge to play the real game.
Most trading platforms/brokerage companies involved in forex trading offer such demo accounts, sometimes free and sometimes for a small fee. Even if a fee is paid, it is usually worth it because a forex trader can parlay his skills and knowledge into vast profits after spending some time practicing with the forex demo account. Generally checking with a broker can get a demo account set up quickly. A trader interested in setting up a forex demo account can also go online and find a vast array of companies ready, willing and able to help the student trader set up an account and enhance his skills. No matter what game you are playing, and forex trading can be seen as an advanced financial game, by using a demo account you are able to learn enough to go foreword and become an active trader.
A few trading platforms/brokerage companies state that demo accounts have little educational value. According to them, because there are no financial consequences, a trader will indulge in emotional decisions and overlook one of the most important lessons in forex trading: reason must rule over emotion.
Many of these companies, instead of demo accounts, offer other effective forms of training, like guided tours, forecasts and charts, seminars. They also offer the possibility to start trading with very small volumes while learning in real time. One-on-one online training is available, covering the basics of the foreign exchange market, trading terminology, advanced technical analysis and successful trading strategies.
About the Author
Learn more about Forex Trading and Forex Trading systems by visiting http://trend-forex-system.blogspot.com/
