forex demo trading account capabilities & importance | pros & cons
Practice is the key to succeeding in any aspect of life, and trading doesn’t have it any different. Foreign exchange looks comfortable and lenient on the outside but is a field that demands immense dexterity. Live-trade markets can be a terrifying sight for novices! With these grounds occupied by the professionals, where can one learn how to trade currencies without suffering the repercussions of risk? On demo trading accounts!
Forex demo accounts are simulators that generate a real-time trade on virtual grounds. On these platforms, you work with virtual money and are provided with the necessary means to practice your moves. Along with newbie traders, even professionals use it from time-to-time, to work out different strategies and see their implementations. Without the risk of capital loss, traders can learn freely and enjoy a flexible experience.
Potential of a Demo Account
With a demo platform, you can partake in a simulated trade that has been designed to mirror the real-time markets. If you were to practice on live trades, you would be subjected to harsh risks and the ever-existent fear of losses. Though this fear is rational and necessary, as a novice, it might feel overwhelming. Demo accounts provide a safe environment to learn without having to fear any consequence of your actions. Here are some of the many capabilities it has:
1) Charting: Studying charts is incredibly important while trading currencies. Without knowing the various trends seen in a market, finding the most lucrative one will be impossible! Forex demo trading will help you learn chart interpretation, using indicators and implement the various charting tools.
2) Trade Tool Analysis: Indicators for analysis and other trading tools will be of huge help while exchanging currencies. These tools help deduce the best environment to trade on, and Forex demo accounts will help get accustomed with these tools.
3) Studying Markets: An indicator is only useful when you can read markets. Without knowing the basics of highs, lows, opens and closes, thriving in Forex markets will be difficult! With a demo account, however, you can get a hang of these aspects in no time.
4) Testing Financial Conditions: Different currencies behave in different manners across a variety of market conditions. EUR/USD might see a dominant trade in one pattern but a dormant streak in the other! Practicing on Forex demo accounts will help you grasp this difference easily.
Advantages of Using Demo Platforms
When you are just starting off, there will be little you know about Forex. Trying to learn from live trades will not only fail to serve the purpose but will also end up costing you money. This is where demo trading accounts come in, they provide traders with:
1) Risk-Free Experience: On a virtual platform with simulated money, there are no risks to deal with. So mistakes made on this account will only help you learn and avoid them, instead of getting intimidated altogether. You can even learn to leverage without having to fear suffering big losses.
2) First-Hand Learning: Forex trading isn’t a field that can be covered with just book learning; practical learning is of paramount importance. Demo trading accounts will let you experience markets and speculate the potential dangers that will head your way eventually. Along with this, these platforms will also enable you to learn how to devise trade strategies and implement them perfectly.
3) Testing Broker Quality: One of the best benefits offered by a demo platform is the provision to test a broker’s quality of service. With these accounts, you can check the efficiency of their software, and how helpful their customer service is!
Disadvantages of Demo Platforms
Though designed and implemented for bettering the trading experience, there are some drawbacks demo trading has:
1) Lack of Real-Time Implications: Forex demo trading provides a virtual environment to trade on, with virtual money. This environment is vastly opposite to real-time trades. The absence of risks makes it difficult for traders to come to terms with the fact that one wrong move can collapse their trade completely.
2) Limitless Investments: On demo trading accounts, you can start every trade with a million dollars, because it’s virtual money! Would you be able to do that in a real trade? Most traders will be working with their hard-earned money and the smallest of mistakes can cause them to lose it completely. With unlimited potential at your disposal, you are bound to lose control.
3) No Live Market Fluctuations: A real-time Forex markets fluctuates scarily and have immense destructive potential, a demo trade however doesn’t replicate this trait. On demo trades, you will be working worry-free, with no risk or loss to care about. Once this becomes a habit, real-time trades will be very scary.
4) No Emotional Preparation: Dealing with risks, losing money and trading real-time, all have emotional implications. Either fear greed or confidence makes the home in the heart of each trader while exchanging currencies. Learning how to deal with these emotions is as important as trading itself, and demo trading won’t equip you to do the same!
Advantageous and disadvantageous at the same time, demo platforms have to be used wisely to see results. With an adept broker by your side, however, you can see healthy growth while slowly learning real-time trading! Call WesternFX today and hire from our team of world-class brokers. Forex demo trading, real-time trading and platform usage, we will equip you with all the necessary to win your endeavors!