Before you trade on the forex live market you need to use a demo account. Demo accounts are available from all Australian forex brokers at no cost. It is important that you know how you should be using these accounts and how you are going to be trading on them. There are a number of differences between the live account and the Australian forex brokers demo account. You need to know what these differences are and how they will affect your trading on the demo and the live accounts.
Use a Demo Account Like a Live Account
When you start trading with a demo account you will see that it uses virtual currency. This causes many traders to trade in a manner they would normally not use. It is important that you treat your demo account as a live account. When you do this you will be trading the foreign exchange rate in the same way you will when you trade live.
When you do not treat the demo account as a live account you are not getting the full benefits. New traders use demo account to prepare for the live market. If you are not trading in the same way you would when trading live you are not preparing properly. It is also important that you trade according to your trading strategy and plan. If you deviate on the demo account you will transfer this bad habit to your live trading.
The Australian Forex Brokers Currency Pairs
As you need to treat the demo account as a live account you should only trade the currency pairs you will when trading live. Of course, with the demo account you can try the different pairs with your strategy to see the one that works the best. However, once you identify the best pair you should stick to trading this for a period of time.
The Use of Leverage on a Demo Account
Demo accounts offer the same amount of leverage as the live trading account. This helps you understand the risks of using leverage. However, the fact that you are working with virtual currency actually lowers the risks you face. There are no repercussions to your financial state if you lose money through the leverage you are using. It is important that you work with the trading balance as if it were real money. This means that you should consider the risk to reward ratio of all trades before you apply any leverage to your demo trades.
The Trading Account Balance
One problem that many traders have with demo accounts is the large trading balance they offer. Most demo accounts have a set balance of $10,000 which is much more than most retail traders are able to deposit. This gives you an unrealistic idea of what you can make on the market and the risks you can use. The larger the capital amount you have the lower the risks of leverage are because of the account buffer.
To overcome this problem some forex brokers will lower your trading balance if you ask them to. However, other brokers will not do this. If your broker does not lower the balance you should trade with only the amount you know you will have in your live trading account.