Forex demo trading account is often a starting place for traders. Even the more experienced traders nowadays have more often than not started their trading journey, somewhere along the lines with a forex demo trading account, also known as paper-trading. While some traders might look down on a forex demo trading account, the advantage it offers far outweighs other’s opinion on a forex demo trading account. In fact, some of the most popular trading psychology books and training books on trading often encourage traders to maintain a demo forex account alongside their live trading account. In this article, we will show how a forex demo trading account can be a great way to develop some discipline into your trading strategy and the benefits a forex demo trading account has to offer for you.
How can a forex demo trading account help traders?
To begin with, let’s start with the more obvious. A forex demo trading account is risk-free. In other words, there is no risk of losing any real funds (which is partly one of the biggest reasons why many tend to look down about a forex demo trading account). However, if you set aside the psychological aspect of trading with risk-free funds, the underlying fact remains that as far as honing your trading strategy and developing your trading psychology in relation to trading, nothing beats the advantage a forex demo trading account has to offer.
For starters, if you follow a trading strategy that is proven to offer consistent profits, chances are most traders still fail to make any profits from using the very same strategy. Trader emotions are one of the biggest factors at play as traders tend to take some shortcuts in an effort to enter a trade before it is confirmed. The greed factor to make a few extra pips often trumps logic. If you are one of these traders who struggle with maintaining your discipline in regards to your trading strategy, a forex demo trading account can be a great way to help you tone down your impatience or your trading emotions.
Even if you do end up making an honest mistake of jumping the gun, a forex demo trading account won’t put your real funds at risk, besides the point that traders who are really serious of developing their trading skills can always re-visit the trades which they took out of turn in order to ascertain how good or how bad the trade resulted in.
Another benefit of using a forex demo trading account is the fact that traders are often subjected to the same trading conditions as a real trading account. Therefore, it allows for traders to also test out their trading strategy, especially when it comes to different market conditions. Because the market volatility is almost the same as in a real trading environment, a demo forex trading account can help traders to see how well their trading strategy performs when markets tend to change dramatically. The benefits from this can help traders to fine-tune or tweak their strategy and can help traders to understand when to best stay out of the markets and when best to trade.
Of course, merely using a forex demo trading account just to practice trading won’t really help traders unless they take their demo trading account seriously. A good start is to connect your forex demo trading account to a third party analytics website which can help you to understand the key metrics of your trading strategy or your approach. This methodology can help traders with a forex demo trading account to get intimate with their trading strategy so that when they apply the same to the real markets with real money at risk, the chances of trading profitably and consistently is greatly increased.
So, if you are still in doubt whether to use a forex demo trading account, it is never too late.