Pre-Trade Practise: What is a Forex Demo Account? – Arabian Gazette

All that you always want to know about Forex trading and how to get started with a demo forex account before mastering the art and science of trading

A forex demo account is a software tool usually offered by most trading brokers. It is a way in which you can use money (not real of course, but fake) for training and practising trades on a real trading platform. It is an invaluable process in which would-be traders can learn to understand the terminology, the strategies and the various tools of trading foreign exchange before funding the account with real money.

Demo accounts are useful
tools for traders looking to learn how to operate the foreign exchange market
as well as for experienced traders looking to experiment with alternative
trading strategies or who want to trade different commodities.

Even experienced stock
market traders who might want to try the forex will encounter different
influencing triggers and subtle changes in market conditions that they might
not have encountered elsewhere.

For the majority of users
though, a demo account is a vital tool for first time traders or those that
would like to trade, or have an interest in doing so but don’t have the
available funding. It is real environment to test out their trades under actual
market conditions in a risk-free way.

Demo account features

There are a number of
useful features and tools that a trader can utilise with a demo account. For
instance, XTB has a number of
tools that are vital to understanding the way in which trades are made and
the information needed to master them.

Free trading: Traders can explore, risk free,
through virtual funding and buy, sell and put into play various trading
strategies. In fact everything about a demo account is the same as the real
thing, except you aren’t using real money.

Price indicators: By setting up stock indicators traders can set alerts for buying and selling their positions.

Desktop or mobile: Most demo accounts can be opened
on either a desktop, laptop or mobile device in much the same way, making it a
very flexible platform.

Access to markets: It isn’t just the forex market that
can be access through a demo account, over 1500 other markets are also
available for traders to experiment and practise within.

Customer support: One of the key benefits of using a
demo account is being able to access customer support for any problems
encountered. When something goes wrong, or a trader fails to understand what to
do while using the software, it can be reassuring to have someone to talk you
through the trading language and process.

Mastering the skills of trading

Most successful forex
traders will open up a demo trading account at some point. Whether it’s to
experiment with new strategies or to just to practise their trading skills
before graduating to real money. A demo account is something that just cannot be
replicated on paper or in the classroom.

Using real time market
analysis is the best way to learn how to trade. At each stage of your
development, seeing decisions and strategies being applied in real time is
essential for a deeper
understanding of the market.

Another benefit of using a
demo account is getting to know the forex broker you are going to use. Not only
does the demo account offer an insight in to how the forex software is likely
to operate, it also allows the trader to build a relationship with it, before
risking real money.

Source: Pixabay

Demo accounts as teaching aids

It isn’t surprising to
learn that demo accounts are widely used by schools as a teaching aid for
students in both economics and finance classes as a way of effectively
monitoring trades, strategies and market forces.

Already present and an active participant in this way within many university
faculties is the Bloomberg Finance Lab, offering access to market analysis in
much the same way as forex demo accounts do. Nearly all the basic concepts and
rules of economics can be found in the process of setting up, monitoring and
settling a stock or forex position through a demo account.

The demand for demo accounts grows

Demo accounts haven’t
always been available. Since the widespread adoption of the internet and faster
connection speeds, it has enabled almost anyone to access the forex markets, in
much the same way as the professional traders do.

There are precious few
instances when pressing the wrong button, and making a mistake in deciding a
trade can actually be a good thing. When you use a demo account, this is one
time when you can see the error and its full consequences, without it costing
you a dime. It is a more common occurrence than you might think. Demo accounts
are one of the most useful tools a trader can learn with and it usually pays to
take full advantage of one.