Are you interested in trading online but feel overwhelmed or discouraged by your lack of experience and knowledge? Wondering if you’ll ever fully understand terms like stop-loss orders, pips, leverage, and similar confusing trading terminology? Don’t worry. There’s an easy way to practice forex trading, understand all the jargon, and learn how to apply trading strategies without risking a penny of your own money.
What’s more, you’ll be able to see what would have happened if you had used your own money, and if you lose, you can practice some more until you get the hang of trading. If you make a loss in every single virtual trade or even blow up your forex practice account, your losses will be imaginary, while the lessons learnt are real. You can do this by opening a forex demo account. Many of the best brokers today offer excellent forex trading demo account packages that are highly useful to traders at all levels.
What is a Forex Demo Account?
A forex demo account allows you to try out a broker, practise making trades, and find your way around a platform without risking any real money. Forex demo accounts offer you a set amount of virtual funds to play with. You can use them to place trades in simulated trading conditions that are the same or very similar to actual live market trading conditions. Therefore, you can see with each transaction whether you would have made a profit or a loss and what you could have done differently to improve the situation.
Forex trading demo accounts are typically used by new and inexperienced traders; however, some more advanced traders sometimes use a demo account to experiment and try out new trading strategies. They can also be helpful when switching brokers and getting used to a new platform and interface.
Brokers offer demo accounts so people can effectively ‘try before they buy’. You usually only have to sign up at a new broker with a few basic details to open a demo account. If you like the platform, you can switch to a live account, at which point you may have to verify your details and will, of course, have to fund your account.
While demo accounts are handy, it’s important to note that they sometimes differ from a standard live account. Demo accounts attempt to mimic real market conditions but do not always do so perfectly. The trading environment can be a little unrealistic, with some accounts not allowing for the slippage and re-quotes that sometimes happen in periods of high volatility in the real forex markets. There is also a lack of real consequences, as the funds you are trading are not real, so some traders find that they take more risks when trading with a demo account, so their strategies do not perfectly translate to the real world. Overall, however, forex demo accounts can be a handy tool.
Why Trade in a Forex Demo Account?
Whenever possible, it is important to practice with a demo account before risking your hard-earned capital. It is essential for beginners who are still learning to trade, but it also applies to experienced traders who are testing a new strategy. Some experts suggest placing at least 50 demo trades with a new platform or using a new strategy before switching to a real account and risking real money.
A forex demo account allows new traders to start understanding how the complex world of forex trading works. They can see precisely how spreads work, whether they will make the kind of profits they think they will (after spreads and any commissions are factored in), how to use specific types of orders such as stop loss and limit orders, and how to apply various strategies and see if they result in profits or losses.
Many platforms will offer the full experience you get with a live account, including access to charts and technical analysis resources and features such as the broker live news feed, historical data, drawing tools, and educational resources. Some brokers offer forex demo trading for a limited time; however, many allow you to keep a demo account for as long as you want, including running a demo account alongside your live account to practice new trading techniques and strategies.
The Best Forex Demo Accounts
If you are looking for the best forex trading demo account, we are here to help. We have compiled a table of some of the top forex brokers who offer a demo account to all new clients.
|#1||73 % of retail CFD accounts lose money US Clients: No Regulated : Yes||
– Ultra – fast execution from 0.1s
|$100||from 0.0 pips|
|#2||Your capital is at risk US Clients: No Regulated : Yes||
– Flexible leverage up to 500:1
|#3||Your capital is at risk US Clients: No Regulated : Yes||
– 40% New Member Bonus
|#4||86% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. US Clients: No Regulated : Yes||
– FCA, ASIC, CySEC Regulated.
|#5||Between 74-89 % of retail investor accounts lose money when trading CFDs US Clients: No Regulated : Yes||
||$200||NDD 0.09 / Standard 0.69|
|#6||67% of CFD traders lose US Clients: Yes (eToro USA) Regulated : Yes||
|#7||Your capital is at risk US Clients: No Regulated : Yes||
||$5||From 0.0 pips|
|#8||Your capital is at risk US Clients: No Regulated : Yes||
– CySEC, FCA, FSCA, SCB Regulated
How to Choose a Forex Demo Account
When choosing a forex demo account, there are a few things you should be looking out for to make sure you get the best deal and make the most of your practice trades.
Trading Platform Access – If your purpose in opening a demo account involves checking out the forex broker’s trading platform, make sure that opening a demo account will give you access to the real platform with all, or most of, its most important features.
Virtual Money – Virtual money is what you will be trading with in your demo account. Since virtual money is free, most brokers will provide you with a very generous amount. The more you want to practice trading using your demo account, the more important it is to have an account with a more considerable initial amount of virtual money to play with. Amounts around $100,000 seem the norm for many forex demo accounts.
Dummy Trades – When trading in a demo account, you will generally be taking so-called “dummy trades”. Such transactions have no reality regarding the impact of their profits or losses on your actual trading portfolio, so you can afford to make mistakes with them, which you can learn from.
Live Trading – Live trading or “going live” is what most aspiring forex traders want to move on to after successfully trading a demo account. This means that you place real funds at risk on each trade, and your portfolio has to take whatever the market offers you in terms of profit or loss. Most traders just starting in forex will want to see that their trading strategy works well on a demo account before taking the plunge to start live trading, but they’ll also want the opportunity to upgrade easily to a live account when ready.
Margin Trading – Most forex demo accounts allow practice traders to get a sense of what it feels like to trade on margin. This aspect of trading in a demo account can be very educational since you will probably be margin trading when you start live trading if you, like most personal forex traders, are funding your own portfolio. Remember that using leverage increases the risk!
In addition, you will want to manage your margin carefully when trading to avoid having less than necessary to support your open positions. Remember to be responsive to any margin calls unless you want your positions to be closed out, which many forex brokers do automatically when your account’s margin becomes insufficient to cover your portfolio’s losses according to their stated margin requirements.
Customer Support – Demo traders that require some customer support services to get started, either installing the software or trading, will want to look for forex brokers that have a good reputation in this regard. The standard for customer support varies widely among brokers, so find one that will best fulfil your needs.
Trading Interface – The trading interface for forex demo accounts should be identical or very similar to the actual trading platform you will be using when you go live. This will allow you to get intimately familiar with the process you will need to go through to enter orders, manage positions and execute trades.
Real-Time Rates – The best forex demo account software will display close to real-time exchange rates that change along with the market as it ticks up and down over time. This will give you a good sense of whether or not the trading strategy you intend to employ in live trading would have worked over the period you are using for demo trading. Naturally, the best type of real-time exchange rate is one you can deal on using the demo account software. This way, when you go to enter a trade or an order in your demo account using your forex trading platform software, you are not surprised when you see where the market is really trading.
Trading Tutorials – Many forex demo account providers also offer helpful trading tutorials, either in text or video format, which complement the educational service provided by their demo accounts. These tutorials will usually be provided free of charge. In addition, they can help you learn to use the trading platform and often provide helpful information that can help you learn how to improve your trading techniques and develop a profitable trading system. But of course there is always the risk of losses (up to total loss).
News Feed Access – Forex trading platforms often provide access to high-quality news feeds from professional forex market information sources that might include Reuters, Associated Press, Bloomberg or Telerate, so you can often use a forex demo account to obtain access to valuable trading news. You can also check to see if the news your trading platform provides will be suitable for your needs. This is especially important if you have a strong interest in trading based on fundamental factors.
Information Resources – When you open a forex demo account, you may also qualify for full access to the broker’s information resources. These can include informative material like courses, eBooks and other tutorials, as well as timely market commentary and economic calendars that can assist you when making trading decisions.
Entering Orders – One of the most valuable aspects of opening up a forex demo account is the ability to preview how you will need to go about entering orders in practice. Entering orders correctly and in a timely fashion is an important key. Furthermore, you will want to take the opportunity provided by demo trading to familiarise yourself with the different types of orders the broker offers and how to enter each of them into the market at appropriate times and in various situations.
Dealing Spread Impact – Many people simply back-test their trading strategies over historical exchange rate data rather than demo trading them, which means they can fail to consider the impact of the dealing spread on the success of their strategy. Then, the difference becomes much more apparent when they move to live trading. Demo trading using real market bid/offer pricing allows you to assess this dealing spread impact more clearly in advance for any trading strategy you might decide to use.
The Benefits of a Forex Demo Account
The benefits of trading with a forex demo account include:
- The ability to try out a new trading platform and find where everything is
- A risk-free opportunity to practice trading forex when you are brand new to it
- A way to develop a trading style that will work for you, given your appetite for risk
- A chance to practice good money management
- A risk-free opportunity to try out, assess and analyse new trading strategies
In short, a demo forex trading account will increase your chance of forex trading success by allowing you to familiarise yourself with the platform, practice placing trades, assess what works, and analyse what doesn’t in order to improve. A demo account is an excellent idea for a brand-new trader.