5 Benefits of Forex Demo Trading

Forex Demo TradingOne 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:

Test your strategy risk free

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.

Help you get accustomed to trading platform

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.

Automated software speed up back-testing process

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.

Psychological Aspect

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.

Using different brokers for Charting and Live 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.

Chris Farnworth is an independent Forex and Commodity trader with many years’ experience under his belt. He travels and works from around the world trading and writing content for various websites and blogs. In his spare time he enjoys scuba diving and surfing.

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5 Responses to “5 Benefits of Forex Demo Trading”

  1. liaueg 22 February 2010 at 4:44 am #

    Agree with the assessment.
    However, the difficult part is discipline. Most of the time, if you see that the you are making money in demo, you would want to jump in live without thoroughly testing the strategy or the Expert Advisors. I got "burnt" quite a few time because of my impatient

    • FirePips 22 February 2010 at 5:03 am #

      You are right. It is easy to trade in demo where emotions doesn't contribute to success or failure. Sticking to trading plan is what it is all about.

  2. Onyebuchim 22 February 2010 at 7:55 pm #

    I totally agree with you. The only chance to get burnt and come back again without a physical hurt is only on the Demo.

    It cost nothing and benefits immensely trying out strategies and perfecting them.

    The more you demo and practice the more Courage is built.

    I also want to recommend Forex Tester. its a simulation software just like the real MT4 platform that doesnt need an internet connection to learn forex. it simulates ticks and can use virtually all the features of a standard MT4 like you were connected online.

    • FirePips 22 February 2010 at 9:25 am #

      Forex Tester works well. I used their demo and it works quite good.

  3. skyleng 14 May 2010 at 1:16 am #

    I am new in forex, not really fully utilised on the MT4 platform. I would like to seek your help, if your have MT4 training video for me fully familiar it functional. No doubt will help me a lot.


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