FX stands for foreign currency and exchange. It refers to changing one currency to another to perform any financial transactions. Visit MultiBank Group
Forex trading is similar to stock trading in certain ways. It involves buying a certain currency and holding on to it for a certain time. When the right time arrives, the currency is sold at the current exchange rate, and hopefully, a profit is earned.
However, FX trading is far more complex than stock trading. Factors such as CFDs (contracts for difference), spread betting, and leverage options influence forex trade. As a beginner, you should practice with all these variables and options before plunging into live forex trading.
A greenhorn in forex trade should start honing his skills using a demo forex account before entering the live market. You can use the FX Demo account for the said purpose.
A Demo account uses a real trading platform, but instead of real money, it uses virtual funds. Thus, you have the freedom to trade in the live market without risking your hard-earned money.
Things to Be Learnt From theFX Demo Account
- The timing of entry and exit into the market in FX trading is crucial. A Demo account helpsyou to understand the ideal time for the same.
- You shall understand the concept of stop-loss.
- You shall be able to trade with various lot sizes (1000 units, 10k, 100k). You can also use one or more combinations of these lots.
Advantages of Using aDemo Account:
Practice Trading Without Losing Money:
Before you enter the forex market with real money, you must practice as much as possible on the Demo account. You should feel the comfortable opening and closing trades whenever needed. You should be able to modify the trade terms as and when required.
Familiarise Yourself withthe Trading Platform
Most brokers widely use the MetaTrader platform. A Demo account enables you to familiarise yourself with this platform.
The basic features of most trading platforms include:
o Resources for technical analysis
o Forex quotes
o Latest news feeds
o Charts and drawing tools
o Historical data and trends
As a beginner, you can obtain hands-on experience using these features and gain real-life exposure to these tools.
Experiment With Different Trading Strategies and Find the Best One for You
Almost all successful forex traders enter the market with a well-planned strategy. This helps them calmly deal with the market’s uncertainties and prevents them from making whimsical decisions that may often turn out to be catastrophic. A Forex demo account enables a new user such as yourself to formulate and test out and validate your strategies without losing a dime.
Gain Control over Your Emotions
Trading can often be very emotionally daunting. It is natural to feel over-confident after making a profit in a couple of trades. Frustration and self-doubt are inevitable after losing a few bucks. Often, the future decisions of a trader are heavily influenced by these emotions rather than market research and strategy. Using a Demo account shall help you to familiarise yourself with such emotions and deal with them with a nerve of steel.
Identify the Best Trading Routine for You
FX trading is done 24 hours a day, 5 days a week. It is entirely up to you which time you choose for your trade. Many traders prefer to trade around the opening time of various trading sessions. For example, the Tokyo session starts at 12am, the London one at 8 am, and the New York one at 2:30 pm GMT. You may choose your trading time based on these times or decide on an entirely different time as per your convenience and market research.
Given the myriad of market factors, beginners may initially find it difficult to decide on a suitable time. However,it would help if you chose a time that does not clash with your other important activities of the day. This is because you may often have to take split-second decisions based on market fluctuations. Thus choose a time when you shall be able to follow the market closely.
Detailed Personal Information Is Not Required For Opening anFX Demo Account
Since a live FX trading account uses real funds, you need to provide your detailed personal information to the brokerage firm to open such an account. Some brokers may also ask you to produce some form of identification document. However, a demo account does not require such elaborate details.
Demo Accounts Are Free
You can open a demo account free of any cost. Thus you have the liberty of trading as much as you want to familiarise yourself with the realmarket scenario.
How to Set Up aDemo Trading Account?
You can conveniently open an FX Demo trading account with a few clicks of your mouse. It is a usually involves the following easy steps:
- Fill out a demo account registration form. This form includes your basic information, including full name, date of birth, and email.
- Receive an account number of your demo account along with a password. Now you have the option to choose the account type and the platform. You can choose only one platform with one demo account.
- Download the platform of your choice and proceed to sign up.
Disadvantages of Using FX Trading Demo Account
Since FX accounts do not use real funds, you do not put anything at stake while trading in forex. Many experienced players in this field believe that this immunity to actual financial losses may sometimes fail to elicit the same emotional responses as that with real trading.
Since there is nothing to lose, you may not experience the fear and stress of losing your money and thus may not learn to deal with those responses altogether.
However, if you aspire to be a serious trader, then it shall be prudent to treat the virtual money in your FX demo trading account as real funds. Pretend that the safety net of ademo trading account does not exist.