Some traders today do not bother opening up a Forex demo account that is actually a very bad way for them to start trading in the market. Like in sports, a demo account is your “practice game” and it prepares the user for the time when they will actually be in the playing field.
Keep Money Safe
Demo accounts typically operate using “virtual” money. This allows the trader to spend as much as they want without having to worry about repercussions. This should take the fear out of trying out new strategies or methods that would otherwise cost the trader money. In a demo account, traders can simply reboot their starting capital to a specific amount before starting all over again.
Customize and Simulate Real Life Situations
A Forex demo account opens up the possibilities for “What If” questions. For example, traders can ask themselves what would happen if they start with a $5,000 under specific market conditions. Traders can customize the demo the demo account and proceed in creating strategies, methods and predictions that they might have when confronted with the same situation in a live account.
Familiarization of the Platform
While learning about Forex itself, demo accounts can help traders familiarize themselves with the platform. This should help them learn how to navigate within the program and how to change different parameters. By familiarizing themselves with the platform, new traders wouldn’t have any usability issues once they transfer to a live account.
Learn the Market
There are various uncontrollable variables in the Foreign Exchange market and the only way to predict them is to handle them personally. This is where a Forex demo account comes in. They can provide an accurate simulation of the market’s movement, allowing traders to practice their analyzing and decision-making skills. Traders can also start to correlate different factors with each other, allowing them to make decisions faster. For example, trying out demo accounts would make users more aware of leverage and how it affects their trade.
Create the Perfect System
After experimenting on the Forex demo account, traders will eventually create conclusions about different trading methods. Eventually, this would help them develop the best trading system for their current situation. Even better, traders will have the option of developing their method further by customizing the parameters and coming up with fairly accurate predictions.
Test Out Robots
Experienced traders typically use robots to maximize their profits. Unfortunately, robots can malfunction – which is why they are not automatically used in a live account. Instead, traders can place them in the demo account and watch them perform from there. If they prove to be useful when pitted against real statistics, then traders can start using them in an actual account.
Of course, those aren’t the only reasons why a Forex demo account is so important for starting-traders. Note that even veteran Forex traders are still using demo accounts today to help them with their strategies in this billion-dollar market. If possible, open up several accounts and evaluate each platform before deciding to open a real one.