Pros & Cons Of Using A Forex Demo Account

Many forex brokers and professionals advise you to initially open a demo account to practice and polish your trading skills. A Forex demo account is a virtual practice account that allows you to practice trading with zero risk. You can work on your trading plan, test your strategies and become more comfortable with the trading environment by practicing on a Forex demo account. Today, however, the forex demo accounts are being promoted by different brokers to encourage traders to open live trading accounts in the future.

In the following sections of this article, we will discuss the purpose of opening an online forex trading demo account for beginners and some of the most significant pros and cons of using a forex demo account before opening a  forex live account for forex trading.

The Potential of Forex Demo Account

Using a Forex demo account, you can participate in a virtual trade created to imitate the real-time markets. If you were to practice with real trades, you would be exposed to severe dangers and a constant worry of losing money.

Below we have mentioned some potential for opening a Forex demo account:

1) Learning to Read Charts:

When trading currencies, studying charts is essential. Finding the most profitable trend will only be achievable if you understand the different chart patterns that indicate these market trends. Using a Forex demo account, you may learn how to read charts, use indicators, and use other charting tools.

2) Using Technical Analysis Tools:

Technical analysis is an essential part of forex trading. And a Forex demo account can be apt for learning to use these trading tools properly.

Pros of Opening a Forex Demo Account

Below we have mentioned some pros of using a Forex demo account:

1)  They Are Free:

The majority of forex brokers provide free demo accounts. Brokers offer these free services because they want their potential customers to enter the market more prepared. This is a strategy to attract more traders to their platform because you’re more likely to open a real account with the same broker once you are satisfied with their trading conditions.

2) Test Your Strategies on Real-time Market Conditions:

Developing a profitable trading plan or strategy and adequately executing it on your trading account is crucial for long-term success in forex trading. The real-time market conditions on a forex demo account enable a trader, whether beginner or experienced, to thoroughly test out such strategies on actual fluctuations in exchange rates and see how favorable price changes will result in profits.

3) Get Familiar With the Trading Environment:

You get the opportunity to become more familiar with the numerous settings and continuously moving currency prices because most demo trading accounts use real-time market data to provide you with a trading experience that is close to reality. Moreover, you can use trading calculators to get accurate data related to margin, position size, and lot size. Though you are trading with virtual money, it is always better to follow the same process as traders trading live accounts would. There is also no concern about losing your hard-earned money while learning in a demo account because you are given virtual money to trade.

4) Forex Demo Accounts Rarely Expire:

The majority of brokers let you trade on a demo account forever. A brokerage may occasionally establish a 30-day expiration date or disable access to that account after a certain number of days. Many brokers will let you continue using the same account if you contact support. If not, you can always create a brand-new demo account in a few seconds for free, allowing you to practice for as long as you like without being pressured to create a live account if you’re not ready.

Cons of Forex Demo Account

Below we have mentioned some cons of using a Forex demo account:

1) No Emotional Preparation:

Risk management, financial loss, and real-time trading all have emotional consequences. While trading currencies, each trader’s heart is inhabited by fear, greed, or confidence. Demo trading won’t prepare you to handle these emotions similarly, so learning how to manage them is just as important as learning how to trade.

2) Adjustment:

Demo traders tend to exaggerate their achievements, justifying their actions or making up justifications for why real trading will be superior to the demo. It can be challenging to determine whether you would be able to execute a trade in the same way in the real market at times due to a variety of circumstances. The results from the demo account would be somewhat subjective at best and completely incorrect at worst because adjustments may be made for entries and exits.

3) Most Traders Get Used to Demo Accounts:

Despite having successful demo trading, some traders never switch to a live account for several reasons. They may eventually get bored with trading or decide against making a serious investment. The problem is that some traders get too used to trading on a demo account and do so for an excessively long time. Because of their altered expectations, those traders will be more relaxed if they ever open a live account.

4) Unlimited Investments:

Since demo trading accounts use fictitious money, you can open each trade with a million dollars! In an actual trade, could you accomplish that? Most traders will be using money they have worked hard for, and even the smallest error could result in losing all of it. You will surely lose control when you have unlimited potential.

Many experts recommend using a Forex demo account to become a successful Forex trader. However, forex is one of the riskiest markets in the world, and there is no assurance that you will make money or possibly lose it because prices are continually rising and falling. The only way to achieve long-term success in forex is by being patient and resisting giving in to your emotions.

Choosing the best Forex demo account and selecting the best trading platform depends on your trading style and preferences. Most traders choose the MT4 trading platform for opening a demo and a live account, as the MT4 platform is easy to navigate through and has all the tools that a trader would need. Along with the trading platform, it is important to choose the right broker. You should compare the Forex demo accounts given by several online brokers with varying features. You can choose how much virtual money to deposit into the demo account and provide some personal information such as name, email and phone number.

With both pros and cons present, a Forex demo account must be used carefully to get results. However, you can experience positive growth while gradually learning real-time trading if you have a skilled broker by your side!