Forex trading is now more profitable than ever. With all the instability and confusion 2020 brought us, the currency exchange started really striving. But while professional traders are getting the best out of this silver lining, novices have no idea where to start. Today we will discuss the easiest and fastest way to learn Forex trading risk free: a Forex demo account. 

Why New Traders Should Trial a Forex Demo Account, and How to Get Started

Many will agree that the best way to learn a new skill is to try it out. To start biking you will need to get on a bicycle and to play a musical instrument you’ll most probably have to get access to one. 

With currency trading, however, it is a little more complicated. Sure, we can go directly to the live market and begin the bumpy road of rises and falls. Provided you are patient enough, eventually all the efforts are going to pay off. But there is one big con: live trading requires actual funding. 

Money is absolutely necessary to gain any kind of profit. But risking your capital during the learning process seems slightly uncalled-for. That’s where a demo Forex account comes in handy. 

What is a Forex Demo Account?

Forex demo accounts are essential to productive learning of the foreign exchange market. Demonstration or demo mode is a precise copy of a live trading account. Demo will include all the instruments, indicators, chart setting and so on. 

What’s more the price quotes for any specific currency is going to be taken directly from the market. This means that the trader will get a chance to fully immerse in extremely realistic currency trading experience, without actually trading. 

Demo account Forex works like a simulation. Every action leads to a certain result, but has no consequences in the real world. This way each trade you process in a demo account in Forex will play out just as it would on the real market, however it will not harm your account balance. 

An opportunity to try out a new trading strategy without facing any risks is priceless. In fact, a lot of experienced traders tend to go back into their Forex demo accounts from time to time to experiment with various techniques and master new tools. 

And for anyone who is just starting to trade on the foreign exchange market, demo is an irreplaceable learning instrument. To better understand how demo Forex accounts are equally useful for both pros and newbies, let’s take a closer look at what trading with a demo account looks like. 

Trading With A Demo Account 

So, we’ve already established that Forex account demo mode is an exact copy of a live trading account designed to simulate currency trading experience. In order to start trading in demo you will have to open an account with a trustworthy Forex broker. 

More often than not, you will stay with the same broker throughout your entire trading career. That’s why you need to make sure that a broker you are going to go with is both professional and reliable. Plus, it is definitely a must for your chosen broker to give you access to a demo account for Forex trading for free. 

Once the broker selection process is out of the way and you’ve got your hands on a demo account, it’s time to have some fun. 

There are two general approaches to trading with a demo account. You can either go with your instincts and try everything that comes to mind. Or you can develop a thorough learning plan that will gradually take you through every possible area of financial trading.

The best way to approach account demo Forex trading is combine the two. Yes, you should outline your learning process to make sure that everything is covered and have an idea of how much time the educational process will take up. 

But you also should allow some room for creativity. It pays to sometimes disobey certain strategy rules and go one step further. Even if your trade doesn’t turn out too profitable, the experience you gain in the process is going to serve you for years to come. 

And hey, you are not risking any money, so what’s the harm in running a little wild? Take your time and enjoy non-stressful trading for as long as needed until you get ready to get out in the real world.

Risk free and stress free already sound good enough, but what are some other benefits of a demo Forex account?

What are the Benefits of a Forex Demo Account? 

To have a better idea about all the advantages you will gain through using a demo account Forex, let’s sum them up here:

A Forex demo account does not have a time limit. You can use it for as long as you want to and as much as you want to. Ran out of your demo money? Just open the next account and continue trading. That’s the beauty of learning trading through practice: you can do it at your own pace. 

Forex account demo mode trading can be used at the same time with a live account. This means that before you bet on a certain position in the real market, you have an option to give it a go in demo. It’s true that a demo is not always going to guarantee the precise result, but you can absolutely see the general direction of how things are going to unravel.

You can use demo accounts Forex as educational tools. In case you are looking to show someone a certain trading technique or the layout of the trading platform, demo is the best place to do that. Let your students press all the buttons and open whatever positions: there will be no harm in trying. 

A demo Forex account can be equally effective for all types of trading methods. Starting from hectic scalping and all the way to long-term investment strategies, the technical power of the demonstration mode is pretty sufficient. Considering adopting a new trading style? Try it out in demo first to see if that’s a good idea for your case. 

Any demo account for Forex from a reliable broker will be free to use and very simple to open. You won’t need any complex documents or monetary deposits: just find the right broker and go ahead. To navigate you through this process will discuss setting up a demo account a bit further on. 

Based on all the above, we can safely state that a Forex demo account is a learning tool before anything else. Next we are going to explore the learning approaches that can be used in demo mode. 

Learn How to Forex Trade Risk Free With a Demo Trading Account 

A demo account for Forex is suitable for all types of learning styles, because it doesn’t actually teach you. Instead, the demonstration mode allows you to master the skills and knowledge you got elsewhere. 

With that said, there are still some guidelines on how to make your learning experience in Forex demo accounts as productive and as easy as possible. 

First and foremost, keep it simple. Forex market is like an ocean, the deeper you go, the more there is to be aware of. But nobody is going to judge you for taking your sweet time at the shallow end. Feel the water and get completely comfortable with the environment before you dive in. 

Gradually progress from the most basic concepts to the more complex ones. Make sure to get fully familiar with the professional lingo and the simple ideas before you move on to something a little more in-depth. 

Second, don’t be afraid to make a mistake. Because it doesn’t cost you anything in the demo mode and also because it is not such a good idea to get upset from every setback that you will come across at the market. 

Foreign exchange market is volatile and at times aggressive. Nobody is capable of continuously profiting — there are going to be times when you will win, and there are going to be times when not so much. Demo Forex accounts are ideal to get you used to feeling calm no matter what.

Last but not least, keep pushing through. Forex trading is for everyone, you just need to find the right approach. 

Many traders get underwhelmed with their very first unsuccessful experience. That’s basically where the statistics of over 90% of Forex traders losing and quitting comes in from. 

Patience and persistence are going to get you much further than you could’ve possibly imagine going. And a demo account is a really nice way of training yourself to see past the failures and keep getting up to run again. 

Let’s get a little more specific on how to use an account demo Forex to learn trading, starting with getting to know your trading platform. 

• Familiarize Yourself With Your Trading Platform 

Metatrader 4 is the most commonly used trading platform worldwide. The reason behind its popularity is rather simple: it is equally effective and easy to master.  However, just like with any other software, it requires some getting used to. 

MT4, or any other trading platform for that matter, serves main purposes: market analysis and trading itself. Both trading and analyzing are a lot of information, but it won’t be useful, if you don't get entirely comfortable with the technical parts, also known as which buttons to press. 

Perhaps the best way to go about getting to know your platform is getting a copy of a user manual and go through each page while simultaneously locating the menus and functions in the demo account Forex trading mode.

As already mentioned, Metatrader 4 is constantly updated to stay as effective and as user-friendly as possible, so it won’t take you too much time to get the gist of it. Just make sure not to rush and focus on memorizing where everything is. 

It might also be a good idea to learn some hotkeys and shortcuts to save you some precious time during actual trading. Practice makes perfect is the main idea behind the creation of demo Forex accounts, so challenge yourself to try out different ways of getting the same thing done. For example, alter between using the navigation bar to set up the required indicator and right clicking on the screen to access the same tool more quickly. 

Finally, experiment with other visualization solutions. Adjust the colors of the chart and the indicators to your liking, so you can read them effectively. Don’t over complicate your color coding system to be able to compare your analysis results with other traders without too much confusion. 

It’s time to move onto the other important skill that can be mastered through a demo account, and that is an ability to manage your emotions. 

• Learn to Manage Your Emotions 

Sometimes traders get so comfortable in demo mode, they start assuming that it is going to be just as stress free on the actual market. And while it is important to remain calm, it is still a good idea to get a sense of urge in order to properly manage your risks. 

Begin by adopting a simple philosophy of acceptance. Everything that happens can be a lesson for the future, if you take the correct perspective. You already know that it will not be smooth all the time, it will actually be quite turbulent for the most. 

However, as long as you remember to focus on growing your knowledge rather than sinking into your emotions, you’ll become a true master of Forex trading. 

While trading in Forex account demo mode, try to imagine that you are risking your own personal money and act accordingly. The planning will include when are you going to open a position, when are you going to close it and how big this position is going to be.

Risk managing is a crucial part of successful currency trading. In order to effectively approach the risk taking, you will have to begin by evaluating the significance of the amount at risk and adjust the measures you are about to take accordingly.

Bottom line is, the more thought and effort you invest into the planning process, the less stress you will have to deal with in the result. Know what you do every step of the way and remember that after every failure there will be a new success. 

Now, since we’ve already started talking about careful planning, it makes sense to pay a couple moments of our attention to strategy selection. And here the Forex demo account comes in helpful once again.

• Create, Develop and Test Your Trading Strategies 

Why do you need to have a strategy on Forex? There are several possible answers. Mainly, to be prepared for whatever is coming your way and have specific instructions for how to act.

Strategies in Forex may vary in complexity, the amount of experience required for successful execution, the number of tools and so on. There is no one ultimate strategy that will suit every trader in the world. 

Currency traders all have different skills, expectations and style preferences when it comes to currency exchange. This means that there is a strategy out there to fit each and every one of them. And if you can’t find a strategy that suits you specifically, you can always create your own using a Forex account demo mode as a testing platform. 

Any trading strategy is simply the list of steps that a trader needs to take under specific circumstances. Those steps usually include finding the right conditions on the chart, opening and closing a trade at specific points as well as risk managing measures to prevent the trade from getting out of hand. 

There are thousands of existing trading methods already, and the new ones get created all the time. In order to design your very own strategy, outline your general preferences and maybe find a couple of confirmed strategies to use as a base. 

From there it is very straightforward: keep trying your strategy step by step in the demo mode and adjust it whenever necessary. Record each step to craft a perfect trading method and take it to the real market. It doesn’t matter how conventional your own strategy is for everyone else, the most important thing is that it suits you. 

• Find the Best Trading Routine that Suits You 

A demo account for Forex can both help you find the correct strategy to use and work out a suitable trading routine. Currency traders range from professional financial experts to people from every possible industry, who look at Forex as more of a hobby or a source of additional income. 

Obviously, the amount of time spent trading by a banker in foreign exchange department will be drastically different from a barista who only gets to check out the market once or twice a week. 

Go with your gut and outline how much time you might require to successfully learn trading and actually trade. Consider using a demo account in Forex to work the market into your schedule and only then move onto the real thing. And what is the best way to do that?

The Best Way to Use a Forex Demo Account

Demo Forex accounts are very flexible in terms of how you use them. Some just quickly learn all the platform options and get out, others continue to probe the soil in demo before going to the live market. 

There is no one single answer to how to use a Forex demo account in the best way possible, because all traders are different. However, there is one characteristic you can use to evaluate if you are ready to try your skills in the conditions of the real market. 

You know you are ready when you are completely satisfied with the result of your actions in demo. So, if your main goal was to get to know the platform and you are now fully confident about where every function is: you are done. 

The same way, when you want to create and develop an individually groomed strategy, make sure that it works flawlessly before you take it into action. 

But although it is entirely up to you when to leave the demo mode, we would still strongly advise to spend a little more time figuring out the plan of your following actions. 

Create a Trading Plan for a Real Money Account and Trade it on a Demo Account 

Trading plan is a little more than just a strategy. It is more of a collection of strategies, risk management techniques and learning techniques. What you need to do is create a plan for a real account and try it out in a demo Forex account first. 

Usually a plan would include a series of goals that will need to be achieved over the specified time period. For example, you can aim to double your initial deposit by the end of the first month at the market. Or you might set a limit of going down not more than a half of your first account balance. But eventually, of course, you will want to look forward to visible profits. 

Account for how much time you might need, judging from the outcome of your first trades. Plan to acquire new information and master new skills along the way. Then try the first couple of steps of your plan in demo mode and see if they’re realistic enough.

Make adjustments, if necessary, and always document each step of the way.

Create a Trading Journal to Track Your Practice Trading Results 

Keeping a journal of all your trading related actions in a demo account in Forex can be extremely helpful. The most convenient way to store such data is inside a self-created Excel sheet. There you can organize the information to your liking and access it quickly whenever you might need it.

Journaling also proves to be very effective in market analysis. After spending some time on analyzing the same instruments, you might be able to pick up on patterns no one has considered before. Such patterns can speed up the procedure of reading the charts and serve as a base for unique trading strategies.

Just before we get into setting up a demo trading account, let’s briefly circle back to determining the exact moment when it is smart to go from demo to live. 

Create a Goal to Transition to a Live Trading Account 

One way to know that you are ready to transition from a demo Forex account to a real one is, as we’ve mentioned before, judging on the level of your personal satisfaction. Do you feel like what you are doing is good enough? Great, there you go. 

Another popular approach, however, is to achieve a certain amount of money in demo. Although the profit you gain in simulation is not in any way real, it can be a good confidence boost for traders who are new to Forex. 

Then, once again, it is also always an option to go straight into live trading if you feel like you’ve got what it takes. Just keep the idea of demo trading in the back of your mind, in case you will ever need to try out a new strategy without taking any risks. 

Now, how exactly do you set up a demo account in Forex?

How Do You Set Up a Demo Trading Account?

Starting to trade on demo Forex accounts is very simple: just leave you email with the broker and receive a message that takes you through all the steps. You won’t need to provide too many details, so the entire process will take you less than 15 minutes.

At the end of the registration you will get login credentials for your Metatrader 4 terminal. In case you still haven’t downloaded the platform until that point, the link to it will also be included in the message. 

That’s pretty much it. You are now ready to trade in demo mode!

Forex — Free Online Trading Course 

To make sure your Forex trading journey goes as smoothly as possible, consider going through a systemized learning course. This way you will have a clear idea of the amount of information you will need to go through.

The course takes you through pretty much everything you will need to effectively trade on Forex. Begin with the basics and work your way up to complex techniques and strategies. It might take up some of your time, but it will definitely pay off later on.

And since you already know just how useful a demo account Forex trading experience can be in learning, you can successfully combine the learning with practice. 

Conclusion

Opening a demo account for Forex trading can be beneficial on so many levels. Simulated trades can teach you all the technicalities of the trading platform as well as help you to adopt a certain trading discipline. 

Take your time getting to know the exciting and profitable world of currency trading and make sure to always test out your abilities in demo before going on to the live market.