- Why you should use Forex Demo Accounts?
- Why Try Forex Demo Accounts?
- How Long Should You Keep an Account?
Why should you use Forex Demo Accounts?
If you’re reading this article, chances are you’re thinking of ways to take your finances to the next level.
You’re not alone: UK investment platform Interactive Investor reports a spike in millennials opening investment accounts and personal pensions.
This spike is a result of the current health crisis, which has pushed average household consumption down and opened up avenues for people to invest money into other investment mediums.
Fortunately, newbie traders can get a head start in Forex trading without shelling out lots of money right away.
It might seem counterintuitive to get into Forex trading at a time when the global economy is at a low, but now is the perfect time to learn about the ins and outs of this particular trading medium.
Before you get started, have a read below to find out what Forex demo accounts are and why you should consider them.
Why Try Forex Demo Accounts?
Just like any market, trading in Forex can be tricky if it’s your first time.
A Forex demo account can help mitigate risk by letting you practice with real data — minus the real money.
The amount you get to trade depends on the platform, but it’ll still serve as a great starting point to get you used to how the market moves.
Forex demo accounts also allow you to gauge the kinds of targets you want to set.
At the end of the day, choosing how much to spend (and thus how much you’re willing to potentially lose) is a decision you have to make for yourself.
Demo accounts allow you to play around with spending either huge or small amounts of money, and from there you can decide how much you’ll want to spend once you go live.
The Balance recommends that beginner traders should start with at least $500 (£381) to provide a bit of flexibility to trade in various accounts, which isn’t necessarily pocket change.
Practicing with a demo account will give you the confidence needed to trade this sum of money.
How Long Should You Keep an Account?
The next question to ask yourself is how long you should keep a trading account before going live.
Although it is scary to make the leap towards going live, you can’t hold off forever.
One way to know you’re ready to go live is when you’re comfortable with losing a bit of money.
Losing money is inevitable, especially with Forex trading as you’re usually waiting it out until you get the profits you want.
As a general rule, keeping your demo account for anywhere between three to six months should give you a good enough idea of how profits and losses work.
You’re also ready to go live once you’re familiar with the ins and outs of your trading platform.
Our previous article on Tips for Forex traders points out that over 80 to 90 percent of traders lose money in part because they forget to use stop loss orders, which can help mitigate risk and allow you to go about your daily life without needing to monitor the market every single day.
Demo accounts are worth looking into if Forex trading is something you want to try.
Of course, it’s also crucial that you stay up-to-date with current news.
The Forex market is intrinsically tied to political events, and studying the news will give you a better idea of how to navigate your trades.
This is a habit you should already start while you’re still using your demo account, but remember to keep it up once you do go live.