Before you trade on the live market with forex brokers you have to use their demo account. A demo account is a simulation of the forex live market and the way you will trade with different forex brokers. There are certain differences that come with the use of a demo account from different forex brokers. All brokers will have their own trading platform and manner of trading. You should use the demo account to determine if the way your broker does this is right for you.
The Forex Brokers Platform
There are forex online trading platforms that are extremely basic and others that offer you everything from charting to relevant news. Your personal choice will be the deciding factor as to exactly what you expect from the software you use. You may not want all the integrated features of an in-depth account as you may fear becoming confused. That is fine if the programme you choose offers you the information you require to trade profitably.
The Placing of Orders on a Demo Account
All traders should try out dealer demo accounts before trading live. This is the only way in which you can familiarise yourself with the various features of the trading platforms on offer. When you are placing orders, some of the trading platforms merely use pop-up tickets, whilst other platforms indicate the order by marking its location on the available chart. Some of the easier to use platforms give you the opportunity to click on the offer section of the quote and when you want to sell, all you need to do is click on the bid section. Some of the platforms allow you to limit orders after the quote window has popped up, while you may be forced to make a selection beforehand with some platforms.
These variances in features are important and if you are not comfortable with the manner in which you are required to place order, it could cost you a lot of money. You should place a minimum of 20 demonstration trades on the various platforms before you commence live trading. This will give you sufficient practice on each platform to master the order entry process. Before you trade live, you should be able to answer these questions:
- How is an order limit placed?
- Are the lot sizes interchangeable?
- How is a stop set?
- What are the lot sizes available to trade?
- Can a limit and stop be set at the point of entry?
- Are the spreads variable or fixed?
- Can the dealing room be contacted by telephone if your internet connection is switched off?
Experiment with Trading Sizes
Once you understand the mechanics of the trading platform, you should continue using the demo account to experiment with various trades. Try different trade styles and sizes as this will help you determine your trading style and personality. You will be able to find out if you are a short-term momentum personality who likes the high levels of leverage, with 20 to 30 point moves per day. You may find that you prefer to use smaller trade sizes that you can hold for longer periods that may possibly yield much higher point levels. Demo trading gives you the opportunity to find out the type of trader you are.
You must bear in mind that demo trading may give you confidence, but it is easier to lose fake money than it is to lose your hard-earned real money.