FOREX Demo Account: Everything You Need To Know in 2021
Plus, A list of the Best Forex Demo Accounts
Starting out in the FOREX trading environment can be a scary task for many people; after all, it is a newer market with its own rules and conditions, highly unlike what you know even from stocks.
However, it is far from impossible, as FOREX is an industry with plenty of Fx educational resources. Among said resources, we have the topic at hand: FOREX demo accounts for beginners or experienced traders alike.
Best Free Forex Demo Accounts 2021
In fact, most FOREX brokerage firms offer free Forex demo accounts in one way or another, so you can rest assured that you can only enter the market when you feel wholly prepared.
Listed above we have the Best Free Forex Demo accounts.
However, the topic may go beyond mere “market testing”, as the feature has its many characteristics and quirks. FOREX demo accounts are often explained as simply an entry to the FOREX world or a practice tool.
Today, we will get to know this type of account for what it truly is, what it gives you, and when it is good or bad.
What Is A FOREX Demo Account?
A FOREX demo account is–essentially–a free account that is provided to you with virtual money once you open it. All transactions made with it are not real, and they only exist in your account.
The attraction of a demo account is that you can try out all the features of a broker for free, and you can even start practicing trading in itself without facing actual financial losses.
You can open a MetaTrader 4 demo account individually, without having to enter any broker, so you can test its features. The same can be done with each broker that lists a FOREX demo account within its trading plans.
It is has almost become an industry standard to include this type of plan among the different accounts offered by a brokerage agency.
It is often thought that only beginners use these types of account, but the truth is that even experienced and professional traders use demo accounts to test new strategies and currency pairs, as the features include a realistic representation of the market.
Regardless, FOREX demo account for beginners are still a standard part of every training or educational course regularly offered by FOREX brokers, as they are the best way to approach the previously-unknown market.
What Do You Get With A FOREX Demo Account?
A better understanding of the topic comes with the knowledge of what exactly brings a demo account with it. As such, that’s what we will look over.
Virtual Money, Lots Of It.
The feature that is mentioned the most about demo accounts is the amount of money it starts with.
Most FOREX demo accounts start with thousands of USD in virtual equity. For instance, eToro’s demo accounts give you $100,000, and a MetaTrader4 default demo account has $500,000 in initial equity.
The idea behind such significant quantities of money is to give traders more leisure when it comes to testing the markets, as they are able to withstand losses that would eliminate most investors’ careers.
This lets people try out more strategies and approaches without having to sacrifice their real capital with untested methods.
A More Relaxed Exposure.
What’s the result of such a huge safety net? Traders have a much easier first approach to the FOREX market.
The main idea of a FOREX demo account for beginners is that they can have a first look at how the market functions without having to be constantly stressed about their money.
You can check your positions more rarely, take a bit more risks before closing one just to test your understanding of trends, and they let you test your ability at predicting trends without losing thousands of real Dollars while at it.
Its purpose is to lift the hug tension and stress that newer traders may feel when entering the market and being face with the possibility of bankruptcy, and the end result is that you are able to take decisions with a calm mind and understand the inner workings of the industry since your focus won’t be broken by sudden red numbers in your balance.
A First Approach To The FOREX Industry.
The reason for it to be so comprehensive and safe is that the FOREX demo account for beginners is often their first ever exposure to the market.
The ultimate objective when it comes to the beginner target of a FOREX demo account is to give them a first approach or contact with other traders and the overall business of trading currency pairs.
Parting from that, a first contact must always be as easy as possible, just like in the school days.
The a FOREX demo account must mimic the real conditions, so the only way to make it less stressful is by giving a huge margin of error in the form of a big initial equity.
Learning To Trade
Realistic Market Conditions.
As previously stated, the reason for these accounts having such a huge initial deposit is to make it easier for newbies without manipulating the behaviour of the market itself.
Actually, many demo accounts use the real-world trends and sentiments in their virtual platforms, so the numbers and charts you see are real.
Speaking of charts, FOREX demo accounts offer you the full array of indicators offered by the real broker (depending on the specifications given).
For example, the indicators in the MT4 demo account are the same as in any account you can get.
The Benefits of a FOREX Demo Account.
Opening a FOREX demo account for beginners is one of the best decisions you can make, even if you are only curious about the market.
Here, we will translate the previous features into what they mean for you.
Free Practicing.
You can test the market itself or your strategies for free, without having to risk your actual money doing it in case it goes awry.
This is the main reason FOREX demo accounts are so popular with beginners and professionals alike; beginners can try their comprehension and learning while experts can experiment with different approaches to the ones they already have and dominate.
This is thanks to the big initial equity and the real market conditions that let everyone take advantage of demo accounts no matter their level of experience.
Practice Practice Practice
Lets You Get Familiarized With The Market.
Beginner traders are still the main target audience of a FOREX demo account. Therefore, you are able to know the ups and downs of the market.
The theory you learn is a huge part of starting a FOREX career, but it cannot really compete against facing the real behavior and volatility of the FOREX industry, thus this is the next step to starting your career.
The best part is that you can do it at your own pace, and without getting frustrated about losing money or having a losing streak since you have not invested your actual capital in it.
It is a very educationally profitable place to hang out while you get acquainted with how things work before jumping into the real deal.
Create Your Own Strategies Without Risk.
As we mentioned earlier, FOREX experts can also get a lot out of this type of account.
In fact, several traders today started out by investing real money and having enough actual capital to withstand the loses that they incurred in their first months of trading.
The end result is a strong community of people who never actually got themselves to try demo accounts, and they could have saved a lot of money by doing so!
Imagine you have a new strategy or you want to copy someone, but you are not really sure about how successful it can be.
You can simply apply it to a FOREX demo account for beginners and test it without risking your money on a strategy that may never be profitable.
Apply Everything You Learned So Far.
We said earlier that a FOREX demo account is the next logical step to any learning programme offered by an online brokerage firm or your own studies, and that is because it is the final test for everything you have memorised.
There is not another way to completely comprehend a subject until you have tried and tested your knowledge about it.
It remains true in whatever you are learning, and a FOREX demo account for beginners lets you do just that without losing real money; we cannot stop pointing that out.
Therefore, these accounts are akin to a final test or a thesis for your FOREX trading education.
The Hidden Drawback of a Free FOREX Demo Account.
Despite all the praise these accounts deserve, there is one notoriously big drawback to it:
It provides an approach that is so safe that it may distort how the market actually works.
The end result, if you are not careful, is that you can end up thinking that the market is as easy or relaxed as your experience with a demo account, but the first real margin call will shut it down.
Be mindful that a FOREX demo account is oriented towards a safe approach, and that means that is not 100% accurate.
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About This Article
Author: Mark Prosz
Sources of information and credits for this post include:
https://www.investopedia.com/articles/forex/05/demotrade.asp
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