What is a Forex Demo Account and Why Do We Need It?

If you’re new to the Forex industry you may have already come across the term Forex Demo Account and wondered what it might be. Here we will explain what it is, what you can learn from them, and why you need them.

 

What is a Forex Demo Account?

‘Demo’, short for ‘Demonstration’ is a type of Forex account offered by brokers to clients wanting to test out trading using their systems but with virtual money instead of real capital. Many brokers will offer clients the chance to use one or more Demo accounts without having to become a fully verified client first. A Demo account will provide you with a certain amount of virual money to trade with and test out the trading conditions of that broker. These trading conditions are expected to be the same as on their Real accounts with real money. Keep in mind that each broker may give you different time limits on usage of the Demo account, as well as different amounts to test with. Some may even top up your virtual account if you ask nicely.

 

Benefits of Using a Demo Account

Demo accounts are great for beginners and advanced traders alike, each with their own purpose of outcome.

A beginner should always start practicing with one, two, or even many Demo accounts to learn how trading works. Take your time and make sure to fully understand all the transactions that occur in your account as you buy and sell currencies or other instruments. That way you can be prepared to trade with real capital and make better informed decisions while you do so.

Advanced traders can also benefit from using a Demo Account in any new broker that they sign up with. Even if they have traded with another broker for years, if they ever want to try a new broker, they should test their Demo account first. Different brokers can have different costs associated with trading.

Familiarising Yourself With Their Platform: Use Demo accounts to become familiar with a broker’s trading software, as well as the instruments they offer and the prices listed, since different brokers offer different conditions for trading, you can first try a Demo account and then move on to Real ones when you’re ready.

Learning to Trade: Demo accounts give you the opportunity to learn how to trade, and so see how how different principals of trading are applied to your account. You can try out Stop Loss settings in this testing environment, and you can see how leverage works too. In addition you can try out any strategies to see how well they perform before applying them to Real accounts.

Execution Time: This is the time it takes for your order to be executed, measured in milliseconds (hopefully, since orders that take too long to execute on a Real account can give you unexpected results referred to as Slippage) It’s important to understand that brokers don’t normally have live price quotes running on their Demo accounts. Each broker can have varying execution times on their Real and Demo accounts, so when you trade on a Demo, keep in mind that this is only an indication of execution time, and that their execution on Real accounts are expected to be better.

 

How to Open a Demo Account

Opening a Demo account in a regulated broker is easier than any other account type with real money, because you do not need to become fully verified to do so. Take a look on the broker website of your choice and search for any link that indicates opening a Demo account. You will typically need to provide some basic details about yourself and the broker will most likely email you the credentials you need as well as a link to download their trading platform.

 

 

If you wish to learn even more about trading Forex, please visit ourĀ Forex Education section.

 

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