As a child growing up, I had dreams of becoming a motor cycle car driver. Fortunately my parents were far sighted enough to start me on tricycles. As I grew older, I graduated to a real bicycle, with training wheels. Later, those training wheels came off, one at a time, until I could safely ride a bicycle unaided.
Anyone who has ever done some type of trading will remember the overwhelming feeling when they started out. This feeling is not dissimilar to that faced by a novice contemplating a bicycle for the very first time. You have to balance, steer, and pedal, all at the same time, whilst remembering to use the brake when necessary. It can be done though, as the millions of cyclists across the globe prove on a daily basis. All it takes is a little practice.
In the bicycle example, two choices are available. Dive in, and earn a few bruises on your way to proficiency, or, slowly dip in with training wheels, taking more control as you become more proficient.
Fortunately, in forex trading, a form of these training wheels does exists, the demo account. Trading on demo accounts is like the real trading, except it allows you to ‘fall off’ without bruising your kneecaps.
So, what is a demo account? A demo account is an account opened with a brokerage firms, that allows you to place trades based on real data, without risking any money. Most brokerage firms will allow you to set up a forex trading demo account absolutely free of charge. All the analysis tools and realtime market data is also made available. In some instances, real live brokers are available, even for customers trading on demo accounts, to guide you through the forex trading process. This is probably essential when you are starting off.
The computing age has ushered powerful machines, tools and techniques that were previously only available to the big banks. These tools and software packages vary greatly in sophistication and complexity. Having said that though, many of them are turning profits for their users on forex trades daily.
Because demo accounts work on realtime data and quotes, they are ideal for testing the various software packages on the market. You can use the demo accounts to execute trades based on recommendation and strategies from the different packages, and your ‘profits’ and ‘losses’ to determine whether to keep the packages or return them for a full refund.
As the old adage goes, practice makes perfect. Demo forex trading accounts do not charge you commission, so you can trade as often as you want. Making a lot of trades will help boost your confidence and familiarity with the various tools and packages. It also allows you to experiment with different trading strategies, all in the comfort that you are not risking real money.
It is worth noting that the level of service you will get on the forex trading demo accounts will vary from one brokerage firm to the next, so it is worth checking before committing. Given that they don’t cost you any money though, it is probably a good investment of your time to try different firms’ offerings before settling on one.
Researching firms online is a good way to start. It is important to remember though, that the internet makes it easy for garbage to be posted about a firm. It is worth reading through comments, both negative and positive, and trying out a firm’s offering via a demo trading account before commiting.