By: Charley Warady
It's been heard more than once that practice makes perfect, and having a Forex practice account is used for just that. Many Forex brokers have available to their traders a demo account. Some are for a specified amount of time; used simply to get familiar with the platform. Once the trader is comfortable with the platform he's expected to move on to a real account and that's it for the demo account.
Some brokers don't offer a Forex practice account at all. Their opinion is that these kinds of things attract people that aren't really interested in trading Forex, and only want to play online. It's not worth their effort or technology to set these things up for people that are only going to leave without investing any money in trading.
The novice needs practice
Someone that is new to Forex trading should try it out first, and not have to risk real money; even if it's only a couple hundred dollars via a mini account. The difference between real trading and demo trading is always apparent, but the level of being comfortable is important. If Forex trading is not suitable for someone, it's infinitely better that they learn this right away.
Using a Forex practice account, in the case of all brokers that offer it, will simulate exactly what it's like to trade Forex pairs in a real time situation. The only difference, in some cases, is that the software used for the demo account might not be quite as reliable as for the real account. This rarely becomes an issue, though.
The novice Forex trader needs to get comfortable with a system and with discipline. There is no better way to do this than a Forex practice account. As long as the trader treats it the same as he would a real account, it will simulate real trading. Once the trader takes an attitude of “it's not real money” or “it's only for fun,” then the system is useless to everyone and should be ignored. Even worse is the possibility that this attitude will carry over into real trading. This kind of person is not long for the Forex market. They simply donate their money to the market and move on.
Charting techniques, technical analysis, and fundamental analysis should all be involved in trading the demo account. If you lose pips in the demo account, then make notes and learn why the loss was made. The same is true for making pips in the demo account. It's a learning process and notes should be taken. These notes can be a great reference for when you switch to the real account, and it makes the transition much smoother.
The experienced should test
The novice trader is not the only one who should make use of the Forex practice account. The experienced Forex trader may want to try a new technique or philosophy. The method he is using may not be working any more and it might be time to switch gears. In many cases, with many Forex brokers, it may cost real money to get comfortable with an new system.
There's no reason why a demo account can't be used for this type of trader. If the experienced trader has available to him a way to try something new without risking money, why not? Having a Forex broker who offers a demo account with an unlimited amount of time comes in handy no matter how long you've been trading. Use it. That's what it's there for.