Trading Toolbox – The Importance of Demo Trading and Demo Account

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The Importance of Demo Trading and Demo Account – A simple but effective guide

Most traders don’t learn to trade before putting money at risk, which is truly unfortunate. This is because there are so many things to learn before becoming profitable that mitigating risk will be crucial. I know it sounds a bit cliché, but how can you expect to be profitable with real money, if you can’t be with fake money?

The demo account, or simulated account, is one of the best ways to learn about the mechanics of the Forex markets, and to test out new systems. Unfortunately, most traders feel that demo trading is essentially a waste of time. I could not agree less, as demo trading gives you the opportunity to make mistakes without risking your money. Trading is hard enough as it is but trying to learn while throwing in extra emotions to the mix certainly isn’t going to help. The great thing about demo accounts is that most brokers will offer them, and you can keep them congruent to your live trading account.

Demo accounts can also help you with the psychology of trading as well. After all, it is much easier to trade a system that has proven itself over time than it is to just jump in and start trading. If you have proven that overtime your system makes money, even if it is in the demo account, it is much easier to psychologically deal with losses. After all, no system is perfect.

As you progress in your trading, it’s also the perfect place to try out new ideas. You may be able to find new things work over time, and of course test out things like new indicators. After all, the data is the same, the price movement the same, and the charting package the same. Demo accounts have become so commonplace in the Forex markets, that you should not be with a broker that doesn’t offer them.