Are Forex demo accounts a weird case?
Forex trading is not easy and there is definitely some amount of risk involved, especially if one is new to the Forex trading industry. This is an important reason why a new user is often advised to use a Forex demo account to start trading. In fact, this is the reason Forex demo accounts originated, although it has a lot of other uses.
It is not so for many and varied reasons. Today, we will see some of these reasons and how demo Forex trading accounts differ from live trading accounts.
About Forex demo account
For a trader who may not know, a Forex demo account is a practice account that they can take and practice on Forex trading. It does not use completely real money, so there is absolutely no trading risk. He can use it to test a lot of different trading strategies and get to know the Forex market.
A trader can use it to know how the price of a currency is changing, test his entry and exit from positions, and try to make money without investing in anything. Of course, the money he would earn would also be fake money he couldn’t cash and use, but it was still good enough for him to practice with.
With a Forex trading demo account, an individual can learn the basic, but still important, trading concepts that an individual needs to know for Forex trading. Other things like entering and exiting trades, long and short positions, trading points and the like are all necessary that can be picked up and tested with a Forex demo account.
The trader can also use the demo account to test a new trading platform if he decides to move and give the new Forex broker platform a chance. This is definitely better than quickly accessing a new trading platform and starting trading right away, without knowing any upside trading path. Finally, if he wants to make a drastic change in his trading strategy then he has to test out a new trading approach and equally, it is always good for him to use a Forex demo account for such trades rather than live experience.
This way, if he ends up not trading, he will lose some of his fake money and he won’t have to worry about actual money losses. He can recognize his mistakes here, and approach live Forex trading with all the sufficient and necessary knowledge to avoid these events in the future of trading when he actually starts using his real money.
However, the trader still has to be careful when using a Forex demo account, because it is easy for him to forget that it is not very accurate and the deals may still be different when he starts trading live Forex. So we will discuss why this is, and in what ways a Forex demo account differs from a real Forex account.
Forex demo accounts vs. real Forex accounts: the biggest differences
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The trader does not use his real money
One of the biggest differences between a Forex demo account and a real Forex account is that it does not use real money when trading in a Forex demo account. A trader may think why is this important?
This is very important because it changes the way a trader thinks and approaches his trades. When it comes to a Forex demo account, he is more likely to risk more because he knows he has nothing to lose. This can lead to risky trading moves, which the trader may regret if he repeats them later, with his real money.
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Forex demo account losses don’t look real
Also, Forex trading is hard to feel for the same reason. Finally, the trader will not have to face the feeling of losing their actual money. After losing his fake money in case his Forex trading falters, he simply has to make an important point to be more careful in future trading. When an individual loses real money, this can hit him hard, as he will realize that this is not a game. His actual money, which he worked and earned, has been lost.
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The demo trader’s order is always taken
Another big difference is how one’s trades perform when trading demo Forex versus live Forex trading. A Forex demo account is created for the order that is always executed. He needs to experience Forex trading and know how the price of the currency moves. He also needs to test new Forex trading strategies, and he has no time to waste.
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Forex demo accounts are not accurate
An important thing that every trader should remember is that his Forex demo account is created by a Forex broker who would like the trader to start trading Forex trades very soon. He is offered a Forex trading demo account to practice and test the Forex trading strategies, but he can only provide him with typical trading situations, which neither he nor anyone else will prepare him with all the trading plans.
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Emotional difference
When an individual trades with his real money, he may approach without controlling his emotions. This is a huge trap that he can fall into very easily. Whether he’s experiencing losses or trading gains, if this keeps showing up one and then the other, he may start to get emotional and risk one after the other, only to end it very, very badly for his money.
