Almost anyone can open a Forex practice account but not everyone can put it into good use. If you are aspiring to be a good forex trader someday, you should make the most of your practice account and use it effectively. Simply defined, a practice account is a virtual account that allows you to train in making actual trades in an actual forex trading market, but will only use play money. However, in the same way that any amount of loss won’t really hurt you, any amount of gain won’t benefit you either.
Usually, a Forex practice account is granted to an individual without any additional charge. Most of the brokers only allow a beginning trader to use a practice account for thirty days. But there are cases wherein a trader is allowed to keep his or her practice account for life. In order for you to effectively use your account, you should take note of its positive and negative attributes.
The following are just some of the good things that you can derive out of opening your very own practice account:
- A Forex practice account is free. You do not have to pay for the wide array of experience that you can derive from using your practice account. It does not and it should not cost you anything because the money in the account is virtual money and it bears no real value. However, you will be required to give you real name and telephone number before you are given access to any practice account.
- You might already have a system of techniques and strategies in mind. However, you do not have a venue for testing. With a practice account, you can see how your technique will fare in the actual market condition. By doing this, you can see what points you should improve and which aspect that need to be maintained. And the good news is that you will not have to risk any amount in the process.
- When you have an access to a Forex practice account, you will be more familiar of the platform for trading. According to traders, the platform for trading can be very difficult to comprehend when you are just starting. If you practice trading more using you practice account, you will naturally learn the different functions of the platform.
It will also be great to look at the other side of the coin. Of course, using a Forex practice account can have a number of drawbacks, too. Among the drawbacks are the following:
- There will be a big tendency for you to have a poor assessment of risk. With a practice account, getting used to the virtual money with no apparent value can have its downside, too. Therefore, you should not only be financially, mentally, and emotionally prepared. You should also realize the importance of trading psychology so that you will know when to stop and when to go.
- Those who sign up for a free Forex practice account usually develop a false notion that accumulating profits will be easy because of the initial virtual funding that is granted. Usually, the starting virtual balance is around USD 50,000-100,000. This gives the wrong idea that money can be earned easily.
You should maximize the use of a practice account and use it effectively. This way, you will be better equipped for the real version of forex trading.