Trading

Benefits of practicing on a Forex demo account

Pepperstone
Trading Guides
Aug 23, 2022

Learning the ropes

You have decided that you want to learn and trade forex and are wondering what to do first. A forex demo account is a great place to start.

Different brokers offer different trading platforms. This may be the Meta Trader 4 or 5. The cTrader platform, that is superb for automated trading, or perhaps direct trading from the popular TradingView charting platform.

You may try multiple platforms and decide which is better suited to you.

What is a demo account?

A forex demo account stands for a demonstration account.  In most cases, it will offer the same functionality of a live account. The main difference is that it is not funded with ‘real money’.

The common starting amount for a demo is ten thousand dollars or a currency of your choice. The trader can then use these funds to practice placing trades and using the different aspects of the platform.

 You might want to place a trade at the current price, or ‘at the market’. Perhaps you might want to sell a currency cross at a higher level, practicing a limit order.

Figure 1 demo account

Advantages and disadvantages of a Forex demo account

Trading a forex demo account has many advantages. As well as placing trades you can try out a trading system without the fear of losing money. This is like a ‘try before you buy’ option. Why risk real funds until the system has proven itself?

The main disadvantage of trading a forex demo account is that it will not offer you the same mental state you may have when trading with real funds. The emotions most associated are of "fear and greed."

There are numerous books written on trading psychology. This is the ability to not get mentally attached to a trade. Many a trader’s downfall!

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