One of the main advantages of Forex market is the availability of demo softwares. Almost every Forex broker provides a fully functional demo version of their platform. If you are a Futures, Stock or Options traders, you would find it harder to find a fully functional free demo trading software. Even though Forex demo softwares are widely available, new traders usually don’t fully utilize them. Here are some of the reasons you why demo trading is helpful:
Before I put even a single dollar on the line I like to test my strategy on demo account. Demo trading helps me speed up my learning time many folds and it also acts as initial qualification of a strategy’s potential of success. I can then safely test the strategy over several pairs and identify the most profitable pairs.
Demo trading is the best way to make yourself familiar with the brokers platform. Whenever I use a new broker for live trading, I download their demo and press every single button and check all options. You can’t break anything in demo anyways.
Demo softwares can also be used to download history data which then can be used with Expert Advisors to backtest your strategy. However if you use strategies based on Price Action, like I do, it is harder to code them into a Expert Advisor. Indicator based strategies can be coded quite well with Expert Advisors and hence backtesting becomes quite painless.
If you are new at trading then I’ll highly recommend that before going live, wait until you have doubled your account in demo trading. If you can’t mentally handle losses in demo account, you have no right doing live trading. If you demo account trading reflects more like your poker table habits then you need to spend more time learning psychological aspect of trading.
Forex Demo accounts mostly provide real time data and they can be safely used for your live trading, unless until you trade on 1 min charts where prices can vary from broker to broker. I personally like MT4 charting platform, however don’t like placing trades on it. I use other ECN brokers to place live trades and use MT4 for charting.