Forex demo trading.
Although with a free FX trading demo account there are numerous advantages for new traders to try out before risking their own money, some drawbacks are worthy of note because the very nature of a demo trading account and the resulting psychological responses that a trader may have when dealing with it can be vastly different from the more natural experience of conducting live forex trading with their own hard won cash. These differences can be subtle but certainly exist and it is essential to understand them when considering whether a demo account is the right option for you. You will need to be aware of all these things if you are to avoid them as they can adversely affect your ability to make a rational decision about whether or not to continue with this type of trading.
The first obvious disadvantage to be aware of is that with a free demo trading account, you are at the mercy of the broker who is allowing you to use this service. There is a great temptation to simply jump in there and start trading with real money, particularly if this broker is someone you have had dealings with in the past. It is easy to rationalise and justify this by saying that they are only trying to provide an educational service, or that they are looking to develop their skills and hence offer the opportunity to learn from their mistakes. Both of these reasons have at least been tried by many people and unfortunately, they have not stopped thousands of people from losing their hard won FX trading capital. If you really want to make sure that you get good value for your money, then stick with a broker that exclusively allows you to use this type of account.
Another disadvantage that comes with trading with free demo trading accounts is that since they are so free, new traders often grab a big wad of cash to spend without considering the long term consequences. This often means that they end up losing their initial investment as well as any profits they made. Many traders also jump straight in there without educating themselves about the market and the basics, which often result in them making huge monetary mistakes. This is not only because of inexperience, but also because they jump into trades without considering their short or long term goals and how they will affect them. For example, there are some investors that jump in there and buy large amounts of currency that they intend to sell for a profit later on, only to realize that they have to cut their losses earlier than expected due to a chart that is not looking their way.
Forex demo trading is also known to encourage short-term trading decisions, which often leads to faulty decisions regarding the direction of the currency in question. For example, this could mean that traders believe that the EURO is going to go up against the GBP, when in actuality it has actually just gone down. The trader may then decide to sell all his or her EURO at once in an effort to make a quick profit, only to find that they have no idea how the market will react. In this particular example, many traders would have made a huge mistake by trading with live accounts. However, since they were allowed to use forex demo accounts, they were then able to make these types of mistakes and learn from them, which in most cases can lead to much success later on.
The major downside to forex demo trading is that it can easily influence the decisions of many forex traders and also their strategies. This is because many traders that use demo accounts are unfamiliar with the workings of the free markets, and therefore tend to make decisions based on what they see rather than the facts. The end result can be disastrous for some traders, as they can lose all their capital as they lose control over their investment decisions. Since the majority of forex traders now use trading platforms for live accounts instead of forex demo trading, this risk is almost non-existent.
When choosing a broker to use for your forex demo trading accounts, you must also make sure to take their level of professionalism into consideration. Although brokers do not have to follow your trading habits exactly like you would have to follow in live settings, you should consider how you would feel about dealing with them if they did. You should always ask yourself whether or not you feel confident in their decision-making abilities, or if you feel they are too pushy with their recommendations. In all likelihood, you should stick with a broker who has a good reputation within the industry, as they will be more likely to give you good advice and also be willing to listen to your questions.
The last factor you need to consider before deciding on which broker to trade forex with is the variety of trading currencies they offer. Each platform you trade with should have several currencies you can trade against each other. If a broker only offers one type of currency pair, then you should probably find another broker who offers a wider range of currencies. Of course, you do not always have to stick with the same currency pair - some traders enjoy trading with a range of different currencies, depending on what their overall strategy is. If you feel you do not have the time or knowledge to research the best pairs to trade against, then it may be worthwhile signing up for a free forex demo account and practicing how you would handle trades in real market settings.
These are just some of the factors you need to take into consideration when deciding which forex demo accounts are right for you. It is important to remember that no matter what type of broker you trade with, you are still trading with virtual money - it should be noted that virtual money does not have the same "feel" as real money would. This means that you should learn to read Forex charts, and also practice using indicators and signals to guide your trades. These tools will help you to avoid making expensive mistakes when you are still learning to trade Forex. Once you feel confident enough to enter the world of actual live Forex trades, you will have developed a great base of techniques that will enable you to make some great money in the long term. You will have learned many things along the way, and this can only be a good thing.