Recent upheavals in the markets has meant that investors are more cautious about investments they make, particularly online. The proliferation of technology and the web has resulted in very well informed investors across the globe. Investors are becoming more and more demanding of their tools and their brokerage firms as they attempt to exact greater returns on their capital.
From the power of these tools though, comes complexity. This is true for both the types of investments made, as well as in the tools used. The forex trading market has been particularly hard hit, with a fall out rate of more than 80% of investors. This means that 80% of investors who try forex trading as an investment strategy give it up.
The international forex market is still growing, and daily turnover is more than $3 trillion globally. The problem is that brokerage firms earn money on trades by these individual investors, and so a low retention rate hurts their bottom line. A key contributor to these low retention rates seems to be the complexity of the tools.
The forex market is sometimes not an easy one for individual investors to understand. It takes practices and some effort to learn the workings of the markets, as well as the tools used for trading. Those investors that make the effort though, do see significant rewards in great returns on their capital outlays. One system being used by brokerage firms to encourage investors to consider forex trading is the use of demo accounts.
Demo accounts are no different from real trading. Customers use the same tools in the demo accounts that they would use in real trading. A customer opens a demo account with a brokerage firm, which has imaginary money deposited in it. Trades are executed using real software, and based on real market data, giving an investor first hand experience of forex trading with no risk. The profits and losses shown in these demo accounts reflect what would have happened had the trades taken place in the live market with real money.
Different firms offer varying demo accounts to customers and investors. The levels of complexity and amount of hand holding available differ from one offering to the next. Investors new to forex trading are better suited to the basic plans that also give access to real brokers as a way to learn the ropes. More experience investors can try out the more sophisticated offerings from the various brokerage firms.
The chief advantage of these demo accounts is self-evident. Because they use real software, and real market data, they really do give investors first hand experience of real life forex trading. The potential investor is exposed to the same tools and platforms that real traders are using on a daily basis. There really is no better way than experiencing this before deciding whether the forex trading markets are suitable for a individual investor. As no real money is at risk, some firms offer demo accounts allowing investors to compete against each other. This is all to add an element of competition making the experience even more similar to real trading.
Clearly, using demo accounts accomplishes the double task of attracting potential investors, as well as familiarising them with real trading environments. Offering these, is therefore an additional tool brokerage firms should be using to improve their customer retention rates.