Many of my clients and staff ask me what are views on the use of Forex demo accounts. Bottom line is I am very pro demo accounts. To the point where I have a demo account constantly running on the company systems, as well as my own Forex trading computer at home, even while I am live trading. It is running while I am away, while asleep and even while I am watching my favorite ball team play on Sunday afternoons. My demo account is an integral part of my Forex trading strategy, training, self-education and professional life.
I am very familiar with the negatives associated with demo account trading, as I experienced them early on when learning to adjust from stock/option trading to Forex trading.
1. Demo accounts give a false sense of security in Forex trading.
2. The emotions of "Live Money" trading are not brought into play with demo accounts.
3. Forex demo account quote feeds are not the same as live account feeds.
There are some truths to these. Demo accounts do give newcomers a false sense of security in their abilities, since the emotional involvement with a pretend trade is nowhere near the emotional rollercoaster associated with a live trade with ones own hard earned money. And I do disclose this fact to all aspiring Forex traders prior to them going live.
As far as the price feeds being different on demo accounts, this just isn't true with the demo accounts we utilize. The exact same currency quote stream that feeds my demo also feeds my live accounts. They are both coming from the exact same ip address. I have heard of this problem on other demo accounts, but have no first hand experience with them.
What is different is the market reaction to my demo trades (which is no market reaction) versus my live trades. On a live trade, the very next tic after I execute a trade is in the opposite direction 99.9% of the time (I will explain why in a future article). Another important difference is that the demo is where the brokers test any platform updates or changes prior to being implemented on their live platform. This may cause some instability on the demos which are not seen on the actual live platforms.
The benefits to utilizing a Forex demo account however, far outweigh any of these drawbacks. The two most important reasons are learning how to use the trading platform itself, and becoming familiar the Forex market. There is no worse feeling than to jump on a trading platform, figure out how to execute a trade, make the trade, realize you made it in the wrong direction, and then spend the next fifteen minutes reading through the online instructions trying to figure out how to close the trade, all the while the market is on a surge against you. Please, practice doing everything on the demo platform you intend to use before going live.
Secondly, and this cannot be stressed enough, no other market in the world is as exciting (hence volatile) as the Forex market. You can read, train and study all you want. Until you develop a feel for the Forex market and learn what we call "reading the right side of the charts," your trades will have higher probabilities of ending up in losses. And I will let you in on a little Forex secret.
There are no secrets in Forex. There's not a secret trading strategy that will work for you all the time. Every strategy ever thought up, designed and marketed has also been bought, analyzed and countered by other traders and brokers (us included). You must develop a feel for the market, and there is no cheaper way of gaining market experience than with a free Forex demo account.
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