Is Demo Trading Worth It
There is a perennial debate among FX traders over the value of demo Forex trading.
Some traders swear by it and say it is the best way to get used to trading Forex before going live.
Others say it is a waste of time and nothing like the real thing. So, is demo Forex trading worth it?
It absolutely can be, but it all comes down to your attitude and how you approach it.
Understanding Market Movement
Demo Forex trading is a great way to learn about the markets. Demo accounts teach you how price moves, how different instruments are correlated and the ways in which news releases impact price.
Studying the Forex markets on a demo account is absolutely the first step all FX traders should take. That applies whether you are placing demo trades or not!
You have to spend time studying the charts. It’s as simple as that!
It’s the best way to learn how to use basic technical analysis elements. These include support and resistance, trend lines, indicators, Fibonacci analysis, and many more.
Learning to Execute Your Ideas
Once you have spent time studying the charts and making notes on how price moves, you will start to get ideas for how price trades.
Maybe you notice something about the way price responds to certain FX indicator readings, or have picked up on a price action behavior at support or resistance levels which tends to see a reversal.
Demo Forex trading helps you learn to act on your ideas. It teaches you how to execute trades based on what you think is going on with price.
Getting Used to the Technical Side of the Platform
Along with helping you execute trade ideas, demo Forex trading helps you get used to the technical side of trading.
By this, we mean the actual practicalities of using the MT4 platform to execute trades.
It teaches you how to place entries, stops, and targets. You’ll also learn how to adjust position sizing as well as how to set alerts and manage trades.
Making mistakes on a Forex demo account will not cost you anything. But making mistakes with trade execution/management on a live account can be very costly!
Ultimately, the benefits you will get from demo Forex trading come down to how you approach it. If you treat it seriously and trade as much as you can to act as if you were trading real money, it can be very valuable.
This means only taking the trades set out in your Forex trading plan, using conservative risk, not resetting your account if you suffer a drawdown and patiently trading as if it were real cash to get an understanding of how your strategy could work in live markets.
However, if you treat it like a slot machine, trading too aggressively, with no plan, resetting your account whenever it drops too low, then this is not a realistic representation of real Forex trading and it will not help you.
If you can follow these guidelines and focus as much as possible on treating your account as you would a real one, then it can be a very valuable tool in helping increase your trading ability and preparing you for a live account.