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What You Should Know About Currency Demo Trading

May 16, 2008
Currency demo trading is an indispensable portion of every Forex trader's education. Without a demo account, we would all lose thousands of dollars making all those mistakes when learning how to trade currencies.

Unfortunately, there are still retail traders in the world today who insist on trading 'live' immediately, without first having a chance to try out a demo account first. Often, these are the people who would lose all their capital before exiting from the Forex market.

Currency demo trading essentially involves the buying and selling of Forex (or Foreign Exchange) on a dedicated trading platform. It is almost identical to all aspects of 'live' trading, except for a few minor exceptions.

The biggest benefit of demo trading is that you are not required to trade with real money. As opposed to trading with a 'live' account, trading with a demo account enables you to learn how to trade using virtual (or 'fake') money. This way, you'll be able to pretend to trade as though you were trading with real money, without having to actually pay real money for any of the losses that you might make. Of course, if you make a profit in demo trading, you won't earn any real money either - it's all done in the name of learning the proper way to trade.

It is a good idea for beginners to first get their feet wet in demo trading before progressing on to trading with real money. This way, a beginner trader can familiarize himself (or herself) with the various trading platform buttons and functions. For example, if you intend to enter into a 'Buy' trade but accidentally click on the 'Sell' button, you won't have to pay for this mistake with real money. Of course, your demo account will debit an amount of virtual money for this mistake, but at least you won't have to pay real money for it!

Thus, demo accounts are a great way for you to learn and get comfortable with whatever trading platform that you are using. It enables you to get familiar with entering the various trade transactions, and teaches you how to manage your own trading account.

Another great use of demo trading is to test out any trading strategies that you might come up with. Many experienced traders still use a demo account for this very purpose. After you start trading profitably with a 'live' trading account, you may want to test out various trading strategies that may make you even more money.

However, you wouldn't want to test out these strategies immediately with your 'live' account... after all, if these strategies don't work, you would be paying for it with real money! This is where demo trading can come in handy for you. You can have the benefit of putting your theories and strategies to the test, without having to pay for anything it they do not work as you might have imagined.

However, demo trading cannot completely replace 'live' trading as a form of education. Because you won't lose any real money in demo trading, you won't be able to feel the real pinch when you lose money. In this sense, you will not be learning how to deal with the emotional aspect of losing and winning money. This can only come from trading with real money.
About the Author
John Callingham is an authority on Forex Trading providing valuable advice at http://www.forexsimpletrading.com where you can learn about forex currency trading. Click Here to gain FREE access to his Forex Trading secrets when you sign up for his Forex Trading newsletter.
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