You might be asking yourself, why need a forex demo account if you can head straight signing up for a real one? Before doing things that you might regret in the long run, it is recommended for you to take a closer look at the rationale behind setting up and practicing using a forex demo account. Usually, brokers will tell you that a practice account is a risk free process of testing the waters. But to be more precise, you can put it this way: A forex demo account is a way to educate a beginning trader on the basics of foreign exchange training without risking a single dollar from his or her pocket. So why need a forex demo account? The answer is simple: Why not?
Decades ago, the best foreign currency exchange trader should head straight from the books to the real thing. This can be very scary back then because you can lose everything. Back then, the major technique of traders is to do everything in a measured and conservative manner. Today, beginners are quite lucky that demo accounts are invented. The following are some of the answers to the question: Why need a forex demo account?
- With a forex demo account, you can gain all the necessary experience in Forex trading. As an old adage will say, experience is the best teacher. Despite the fact that failures will be equally painful, it will be less damaging because you are not using real cash in trading. However, the gains if deals turn out to be successful are by nature virtual, too.
- With a forex demo or practice account, you can have a hands-on experience in studying and analyzing the forces that interact and affect the money or currency market analysis.
- All the quotations that you will use are subjected to real market forces. At the same time, deals are closed in real time. This way, you can further refine your strategy without having to face the risk of losing money in the process.
- You get to understand, on your own, the dynamics of risk. By having an idea on what risk can do against you or how the odds will be in your favor (or otherwise), you can draft a clear strategy on how to properly manage risk which will in due time translate to management of money when you move on to a live forex account.
- It is a practical venue to interact with the elements of trading in the foreign exchange environment without hurting too much. Here, you can truly learn from your mistakes and you get a good idea on what your best practices are.
As a beginner, you should take note of all your findings so that you can personally answer the question: Why need a forex demo account? At the ultimate, a forex demo account is a practical means to educate oneself. Though there are schools that give lectures and evaluate your degree of learning through written exam, a demo account is a venue to evaluate your readiness. Hands-on training, therefore, is the most crucial part of your education as a forex trader.