Why Demo Trading is Important in Forex
The importance of forex demo account trading transcends the initial stages of real live trading with benefits that the trader can experience throughout his trading lifetime. Through the pros and cons of starting out with a forex demo account, forex trading experts all agree that the practice these demos provide invaluable lessons for traders.
Understand the Platform
Forex Trading unlimited possibilities for profiting, it also involves a large amount of risk and as brokers typically warn almost everywhere when it comes to leveraged products, losses may exceed your deposited money. That is why traders who are new to Forex must take advantage when brokers offer them to test their platforms and practice for free through demo accounts.
Depending on the market you trade, you have to make sure that you understand the different order types and also how to execute your trades. Demo is the ideal place for that because your actions don’t have any consequences.
Feel For The Market Dynamics
For beginner, this is important to avoid large losses and unnecessary trading mistakes. One has to pay close attention to market dynamics, how price moves and note down following points:
When does price move the fastest and when doesn’t it move?
How do price movements differ across different markets, forex pairs, timeframes?
Which timeframe works best for your daily schedule?
How do news impact price movements? Which news are the biggest movers?
What type of price behavior do you feel most comfortable with?
Do you see lots of gaps and how can you deal with them?
Are you OK with overnight positions?
Preparing For Live Trading
When trading with a demo account, a beginner trader should always try to act like it is a real account so that the transition to real funds goes easier later. You should always keep the risk at levels you think you can manage, as if your hard-earned money was at stake.
You must also have in mind that although people’s risk appetite varies and everyone accepts losses in a different way, each person hates to lose money. This means that someone might feel relatively okay when losing $100 000 in a demo account, but might become highly agitated when losing as much as $50 of his real money.
Protect Your Emotional Capital
Protecting your emotional capital is even more important. A trader who loses his motivation, the fun and the excitement for trading becomes overly negative and frustrated is very likely to give up on trading completely.
Make sure that you understand your motives, don’t set yourself unrealistic expectations and don’t be too hard on yourself. Enjoy the process.
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Trading is an art of making handsome amount.