Why You Need a Forex Broker Demo Account

There are traders who begin Forex trading using a live account rather than a demo account. Also, there are traders who start with a demo account but don’t use it long enough due to overconfidence. In the long run, they realize they are not ready to trade Forex with real money. 

If you don’t want to learn from your mistakes the hard way, you need to understand the importance of a demo account. 

Practice Trading

You will need to practice your strategies. Even if you understand the strategy or have molded it into your own version, you need to develop confidence toward that strategy. It is not your strategy, so if you are to follow a step-by-step guidance from someone else, you need a clear one month minimum of successful data for that strategy. 

This will instill confidence in you that your adopted strategy works. Allow yourself to make a mistake while using a demo account to avoid them when you switch to a live account. The market is always right and you need to adapt to it, which is why a demo account is very important. Always use a demo account to confirm the success rate of your trading strategy. 

Understand Market Movement 

You need to get familiar with market conditions. Remember, the market does not care about you or what you trade and you cannot be right 100% of the time. 

There are factors, events, and speeches that will always be there to turn the market in the opposite direction. This is something constant in the Forex market whether or not you like it. Losses are a part of Forex trading and it is up to you to control these losses. 

The more familiar you are with the market conditions, the easier it will be. The market moves in different directions because of factors you cannot control. So it is impossible to be right 100% of the time. 

Long-term trading with a demo account can prepare you to face the true nature of the market. Get familiar with market movements, reversals, spikes and flat situations. It will take you approximately 3 months to prepare depending on how well you pay attention to the market conditions. 

Acquire discipline

Every experienced trader can confirm that discipline is the most important characteristic that a trader should have. Even though it’s important to know when to trade, it’s also important to know when not to trade. To stay away from the market knowing you will not make money is a very hard thing to do. 

Unfortunately, some traders open positions when they are bored or haven’t met their target for the day. It is unprofessional to do that. When you are ready to enter the market, but there if there is any doubt, do not click the order button. The worst part is if you’re wrong you see that trade you purposely didn’t enter shoot toward your target and you will probably feel regret toward the decision. 

To control this emotion and not let it influence the same scenario next time is very hard. If you succeed, you’re halfway there because if you don’t trade you don’t lose. You must have enough discipline to be strong and confident toward your decision. 

Master Money Management

Money management is something that a lot of hedge funds or trading floor managers keep a close eye on. It comes in many formats. For example, if you give yourself a 100 dollar daily loss limit or that could be 5 dollars depending on your total investment, it’s a format of money management. 

It does not matter what the limit is, but if you stick to those rules, that is good money management. If you set a daily limit of $10 and you lose $5 in your first trade, you cannot simply increase the investment in your next trade. Here, you need to decrease the amount into let’s say $2 in each trade. 

So losses incurred should only be recouped through good money management, even if it means trading twice to break even again. If you ignore this and double up in the next trade, what happens if you also lose that trade? You will be in a much worse situation than you were earlier. 

Practice good money management in a demo account because tomorrow will bring new opportunities even if you fail today. 

Experience Without Risk

A new trader needs to feel the wrath of losses and see his reaction towards it. Well, the risk when using a demo account is zero but it will prepare you for when you trade in your love account. 

If you have been trading with a demo account for one month or two and still not confident, then keep trading. There is no time limit so make sure you perfect everything before you trade with a live account. 

Practice Precision and Timing

Precision and Timing refers to where you enter and exit the market. Every strategy has its own points of entry and exit, which depends on the market conditions surrounding them. 

By practicing with a demo account, you will see where the points are. If your timing isn’t right or there is no precision, it’s a recipe for disaster. So, ensure that you practice until you have good precision and timing. 

Psychological Preparation

90% of traders fail; why is that? Theoretically, trading should be easy because it is simply a case of following rules. However, it is not a case of being right all the time since losses are a part of trading. 

If you are not psychologically prepared to take those losses, it may not be the time to go live. You still need more time in the demo account because these negative factors can mentally scar a trader.