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Currency Exchange Foreign Rate Online Trading Acad Article
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Demo Currency Trading: Is It Bad For Your Health?
from:Demo currency trading accounts are offered as a great free benefit by most forex brokers and are promoted all over in the trading world, but are they always such a big bonus? Could they be bad for your trading health? In this article we will consider demo currency trading accounts from all points of view and take their bad points along with the good.
What is a demo account?
If you have ever used an online casino you will know that most of them have two modes: real money, where you have to actually deposit funds and risk them, or fun/demo mode, where you have an imaginary account balance. They hope you will get addicted, or win a lot of imaginary money and think you are invincible, so that you will go ahead and open up a real money account.
Demo forex accounts are very similar in some ways. Brokers offer demo accounts hoping that you will try out their software platform and like it. They give you the chance to start trading and work out a profitable system without risk, on the assumption that when you decide to invest funds you will go with the platform that you have become familiar with.
From the point of view of the beginner trader, using a demo account has a lot of advantages. It gives you the chance to apply what you have read and begin trading without risk. Ideally, you will start out with or quickly develop a profitable system and a solid trading plan. You will learn to make money from forex trading, develop a cool head and move on to become a successful real money trader. However ...
A demo currency trading account has one big disadvantage and strangely, that is the same as one of its advantages: the fact that it is risk free. When you are not using your own hard earned cash you are likely to open trades on feeling rather than systems, or take risks that you would not take with real money. If you are lucky and your demo trades do well, you may open a real money account with misplaced confidence, thinking that you cannot lose. Experience will sadly soon show you that you were wrong!
Demo accounts are great for experienced traders who just want to get to know a new broker's platform before they commit to switching their account. They are also good for beginners, but only if they use them properly. You absolutely must learn to apply a trading plan consistently and with discipline before you start trading with real money. If you do not do that, a demo currency trading account may be worse than useless.
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