Most traders tend to deposit their trading capital with a forex broker in hopes of turning their invested amount into a profit, but soon realize that it is not as easy as it seems to trade forex. This is where a demo trading account can help traders to get familiar with the forex market. A demo trading account can supply a valuable insight into the world of forex trading and can give beginners the confidence that they need to start real trading. When used correctly, a demo account can be a useful training tool that will give them the necessary basic knowledge.
Demo trading accounts offer a risk free trading environment for the traders. This is particularly useful to beginners in forex trading as it helps them to get accustomed to the markets. Besides the above, a demo trading account can also be used to trade the various instruments that are offered by the broker. Although the spreads and/or commissions may differ, they closely mirror the real trading environment. In this aspect a demo account can also be used to test the trading conditions provided by the broker.
Once traders are familiar with the demo trading conditions, they can then move to trading in a real account. Traders can then opt for a micro forex account which can help them to accurately gauge the actual trading conditions as well as the market conditions with the broker. This transfer process from demo to a live trading might seem straightforward and simply an administrative step. But actually, it can be one of the most challenging periods you’ll encounter as a trader.
Traders are often dismayed to find that their strategy that was highly profitable on a demo account just doesn’t work anymore after making the transition to a real account. Demo trading certainly but at the end of the day, if you don’t jump in and get your feet wet, you are never going to develop the necessary mental skills to succeed in the market. Just like a pilot cannot live his or her life in the flight simulator and a doctor cannot stay in the practice lab forever, you cannot stay on a demo account for too long if you want to succeed at real-world trading.
Transitioning from a demo account to a live trading account can be a steep learning curve, and a novice trader cannot expect to be incredibly successful immediately. It is not unusual for new traders to have great success with demo trading only to fail to make a profit as soon as they transition to a live trading, and this is because the pressure has increased with real money on the line. One of the keys to transitioning successfully from a demonstration to a live account is to resist the urge to trade quickly and to take your time.