Learning how to trade in the foreign exchange market is a complicated business. A Forex demo account can take the pressure away by simulating the market without spending real money. Thus, a new player in the business can gain insight and confidence, and later apply the experience gained in demos for real money trading.
Like any utility, there are advantages and disadvantages to using a Forex demo account. First, the main advantage is learning how to trade and to use the platform itself. A demo enables familiarity with the basics of trading. For example, one can learn how to start executing a trade, making the trade itself, and following through. Secondly, one develops a certain, albeit simulated, feel of the Forex market itself, which depends greatly on estimating probabilities of gain versus losses.
On the other hand, there are also disadvantages in a Forex demo account. First, there is less pressure involved, hence less drive to make the best investments. Second, the simulated skills may give a false sense of security in Forex trading, and may not be very beneficial in real trades. And thirdly, the quotes that one gets in demos may not be the same as live accounts, which will alter the feel of the market once actual trading begins. And yet, however many disadvantages there may be, the benefit of knowing the basics still outweighs potential hazards.
Demo accounts have all the features of a live account, with the exception of virtual money being used. To start using a Forex demo, one needs to go online first, register a demo account and then use the appropriate software. In using the software, one sees the value of different currencies and then tries to make an estimate regarding a specific one, for example, the US dollar.
If you believe that another currency will fall relative to the US dollar, then you can go on to trade for that currency using the US dollar, and sell it when the value becomes higher, earning a profit in the process. This simplistic example of "buy low and sell high" underlies the basic principle of the trading process.
To predict fluctuations in Forex rates, several theories or algorithms may be used. In a floating exchange rate scenario, factors like the international parity conditions, balance of payments model, and asset market model need to be considered. In a fixed exchange rate scenario, Forex rates are determined by the country's government. But in simple terms, the changing current events influence supply and demand factors for each country's currency, and the price of one currency relative to another changes accordingly.
Effective trading in Forex demands a good global mindset. Understanding the Forex demo account will introduce you to the feel of the market, and further practice will prepare you for the real trade. The next challenge is then to have enough capital and patience for trading, in order to appreciate the oftentimes marginal profits that fluctuate from day to day.
Like any utility, there are advantages and disadvantages to using a Forex demo account. First, the main advantage is learning how to trade and to use the platform itself. A demo enables familiarity with the basics of trading. For example, one can learn how to start executing a trade, making the trade itself, and following through. Secondly, one develops a certain, albeit simulated, feel of the Forex market itself, which depends greatly on estimating probabilities of gain versus losses.
On the other hand, there are also disadvantages in a Forex demo account. First, there is less pressure involved, hence less drive to make the best investments. Second, the simulated skills may give a false sense of security in Forex trading, and may not be very beneficial in real trades. And thirdly, the quotes that one gets in demos may not be the same as live accounts, which will alter the feel of the market once actual trading begins. And yet, however many disadvantages there may be, the benefit of knowing the basics still outweighs potential hazards.
Demo accounts have all the features of a live account, with the exception of virtual money being used. To start using a Forex demo, one needs to go online first, register a demo account and then use the appropriate software. In using the software, one sees the value of different currencies and then tries to make an estimate regarding a specific one, for example, the US dollar.
If you believe that another currency will fall relative to the US dollar, then you can go on to trade for that currency using the US dollar, and sell it when the value becomes higher, earning a profit in the process. This simplistic example of "buy low and sell high" underlies the basic principle of the trading process.
To predict fluctuations in Forex rates, several theories or algorithms may be used. In a floating exchange rate scenario, factors like the international parity conditions, balance of payments model, and asset market model need to be considered. In a fixed exchange rate scenario, Forex rates are determined by the country's government. But in simple terms, the changing current events influence supply and demand factors for each country's currency, and the price of one currency relative to another changes accordingly.
Effective trading in Forex demands a good global mindset. Understanding the Forex demo account will introduce you to the feel of the market, and further practice will prepare you for the real trade. The next challenge is then to have enough capital and patience for trading, in order to appreciate the oftentimes marginal profits that fluctuate from day to day.
