When you decide to enter the trading business, you will be given a chance to select between a live or a demo forex account. Depending on how ready you are with the trading business, your choice dictates how stiff or gradual your learning path will be. The paragraphs below highlight the differences between live/real forex accounts and demo forex accounts.
Forex Demo Accounts
In sum, forex demo accounts are simply practice accounts. These are broker-provided platforms that allow beginning traders to get a hands-on experience in trading. There is no actual money involved but these accounts are pre-loaded with virtual money. These accounts enable trades to be executed and the virtual money to seemingly get liquidated even when it’s not. This means that demo account holders actually get the experience of losing or winning their trading positions.
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In view of the benefits of demo accounts, a few opportunities also exist. These are generally categorized as execution and trader opportunities. Execution-related opportunities deal with the actual trading environment itself. It involves a broker helping out when it comes to quoting prices, actualizing trading spreads, and stop-loss execution. Because some brokers are not willing to permit their trading platforms to be used in these simulated activities, traders will need to get used to the platform offered in a live account.
Live Forex Accounts
Opposite forex demo accounts are live forex accounts. These are real accounts where actual money is deposited and traded in the actual foreign exchange market. This is where the experience of losing or winning becomes real. Although all live accounts are designed for traders, they also come in different types like bank accounts. As the type of account provides more and more services, the amount of deposit needed is increased. This comes with the benefit of a wider trading lot and other ancillary services. Small or starter accounts are called micro or mini accounts and may only ask for funding money for as low as $100.00.
While real trading takes place in live trading accounts, the involvement of a broker is improved. This is because the trader has the final say in every trading position. The broker can offer valuable advices but is not really free to act in accordance to his will unless specified by his client.
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As far as values are concerned, this is the type of account that makes every beginning trader who has had a demo account the things he may have taken for granted. Highlighting the best practices in trading, it is implied that a novice trader should already have established enough discipline, good judgment, and a reasonable approach to money while he was still practicing, and not when he is actually immersed in the trading process.
For both of the types of forex accounts above, they may be seen as stages that orient beginning traders before they hit the business. These accounts function in compliment to each other. While forex demo accounts teach the beginning trader the basics of the business, live trading accounts teach the same individual the ways of the business.
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