LEARN TO TRADE FOREX WITH A DEMO ACCOUNT - FIRST STEPS
Coronavirus Update: Please be aware that your trading experience during the Coronavirus pandemic will not be reflective of a regular trading experience once the world recovers and the economic climate returns to normal. It will, however, be a good experience for when such worldwide crises happen, such as financial crashes. We are currently in a market where the bears, otherwise known as 'short sellers' are in control. Learn and practice retracement trades on your Forex demo account while the coronavirus pandemic continues to control the stock markets, as this strategy should work very well in the current climate. Treat your Forex demo account as a live trading account, and this will give you confidence on both your Forex trading strategy and your trading psychology. Don't let the coronavirus be a hindrance, use this time you have in isolation to develop your Forex trading skills.
In today’s article, we will be discussing the benefits of having a demonstration (Demo) Account. We will be covering why you should download a demo account, how to go about doing it and setting one up.
We will also briefly touch on the psychological aspects of using a demo account and how it can help you to be prepared for the live market, and approach it with the right mentality, rather than losing your way and abandoning your strategies.
FIRSTLY, WHY NEW TRADERS SHOULD SET UP A TRIAL ACCOUNT
There’s one thing you need to remember, the foreign exchange market is the biggest in the world with a daily volume of over $5 trillion. Trying to trade this market without any practise is asking to throw your money down the drain.
Having a demo account will enable you to get used to certain platforms as well as test out your skills without being punished by the market. It doesn’t take long and within a few minutes, you will have your forex demo account set up.
Most Forex Brokers have forex demo accounts, and you can select the size of the trading account that you wish to simulate. Forex demo accounts are not only for new traders, but they can be used for a lot of different reasons such as testing trading strategies and methodologies.
Trading tip of the day: If you are a new trader or an aspiring forex trader, when you open a forex demo account you should be aware of the following:
A) Select a trading account of a similar value of funds that you will be trading on
B) Treat the forex demo account the same as you would trade your live account
C) Review your trading strategies and risk management on a weekly basis to find out your trading limitations.
A point I would like to mention is that when I sat with our CEO and reviewed his initial trading years, he revealed that he traded on a forex demo account in his early days for a whole year till he could prove that he was able to manage his risk and perfect his forex trading strategies. The lesson to be learned from opening a forex demo account is patience, and we shall discuss the other significant benefits ahead in this article.
WHAT IS A FOREX DEMO ACCOUNT?
A forex demo account will enable you to trade the markets as a simulation without having to put any of your own capital at risk. It’s completely free and will allow you to use the broker and forex platforms before investing in them.
Watch this video: Learn to trade forex - free forex demo account (05mins 33secs)
THE BENEFITS OF A DEMO ACCOUNT
Any experienced trader will tell you to try a demo account first before diving into the market. Having a demo trading platform will allow you to be able to train yourself in trading by practising. As the saying goes practise makes perfect. At Platinum, we would always recommend using a demo whilst training with us on our trading program, this is to ensure you are not making mistakes with your hard-earned cash.
Familiarising yourself with a trading platform is key to being consistent, as having the platform be second nature for you to use will be necessary. You can practise with the different tools and orders before having to use them for real.
The Types of Platforms you can use:
Meta Trader 4
Meta Trader 5
Also, interactive brokers will allow you to trade on demos using their online-based platforms too.
DEALING WITH PSYCHOLOGY
The majority of beginner traders have no idea how large role emotions play when you are trading, and this is why many fail. Using a demo brings you back down to earth as you learn you won’t win every trade and you will make losses too. You will better be able to deal with losses once you’ve spent time honing your skills and emotions on a demo before trading live.
DEVELOPING STRATEGIES
The main reason people use demos is to develop different strategies in their trading portfolio, trying a new strategy on the live market is a big risk, if you make a mistake, real money is on the line. Being able to test them is key, and every trader should take note of this no matter how experienced they are.
FINDING A ROUTINE AROUND YOUR LIFESTYLE
Most retail traders have full-time jobs and finding time for trading can be tricky, this ties into testing strategies but is still important. Having a demo, to begin with will enable you to find the best routine of charting and trading around your full-time job. The forex market is a 24-hour market; therefore, you can test your skills out at all sorts of times of the day. Use a demo to find when works best for you.
THE BEST PRACTICE TO USE A FOREX DEMO ACCOUNT
The biggest thing with a demo account is to trade it just like you would trade a live account. This means having the exact same amount to start with as you would with a live account, this is key. You should set up the trading plan the exact same way with no alterations. You want all the variables to be the same so when it comes to living, it’s a smooth transition.
Focus on which currency pairs you will be trading, the risk at which you will be trading them, the times of the day you will trade and what strategies you will be using.
ENSURE YOU ARE KEEPING TRACK OF TRADES
Having a trading journal will enable you to understand what strategies are working and what type of risk management will provide you with the results you are looking for. As mentioned it should be traded the same way as a live account, therefore if you return 5% on a demo this will give you a realistic return on a live account.
Always be honest with your results as this will help you transition in live trading easier rather than having false expectations.
The Top 5 Rules for Trading an Forex Demo Account:
1) When you are trading on a forex demo account try and use it as if it is your actual live account
2) When you open you first forex demo account try and familiarize yourself with all the key features
3) If you are new to trading remember that all brokers will help you in any queries or questions you may need answering and you are able to Trade Forex, CFDs on Shares & Indices risk free.
4) Most Demo Accounts will start with around $10,000 of virtual money for practicing & refining your trading strategy. Do not overleverage your account.
5) Try Multiple forex demo accounts before you got live as you have to be comfortable with your trading platform. Ig Markets lets you test drive their award-winning platform and you can trade stocks and forex for free.
CONCLUSION
Having a demo trading platform is a no-brainer and every trader should have one as they start out in their journey, even as experienced traders we will use them when testing out new strategies. Trade the demo just like the live account and trust the process! Trading is a marathon, not a sprint!
The Platinum Formula:
Perfect Fundamentals + Perfect Technical Analysis + Perfect Logic + Perfect Risk Management = Perfect Trade
THE PLATINUM WAY
At Platinum Trading Academy, United Kingdom, we teach all individuals from different walks of life to become a full-time trader or create a secondary revenue stream by trading part-time. We trade in an Institutional Way by letting the market come to us and being patient. Using Platinum’s Trading system you can take many Pips out of the market. We can ensure using this style of trading your trading will make a turnaround as you will become much more consistent.
If you want to trade like the professionals do, making consistently profitable returns from your trading, get in touch with us and we will demonstrate live exactly how we approach the markets.
Download our free ebook to read about the various Trading Patterns that work in the Financial Market. Watch Trades of the Week Videos in our video gallery. Subscribe to Platinum’s Forex Newsletter.
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Nisha Patel
Live from the Platinum Trading Floor.