Motives of the brokers offering demo accounts

Some newbies will be worried about the motives of the brokers offering demo accounts. However, you shouldn‘t be worrying about that at all. This way they are trying to attract more real account traders, which in turn generate more money for the forex brokers. Brokers hope that after you have used the demo account and it fits your trading requirements, you will like it and trade in real account. There are no charges for using demo accounts. If you are very scary of giving away your personal details, you could even create a fictitious persona using only your email (which could also be purposefully created for the demo account).

Real account might work somewhat differently from the demo account

Real account might work somewhat differently from the demo account. Sometimes the orders that you place could take much more time to be executed in real account than in demo. If your strategy is based on short time order placements (getting in and out in a couple of minutes), this time slippage would definitely mean a drawback and money loss eventually. Also have in mind that some demo trading platforms appear differently from the real account trading platforms. Check those things before choosing your broker.

Money management

Money management

The mentioned psychological factor leads to another essential matter – money management. The chosen high leverage in demo account platform would mean big profit in just one trade. Likewise, it would also mean big loss if a chosen currency pair would turn in the wrong direction. You might have a good profitable trading system which you tested in demo account, but using high leverage and hoping for a big money is not enough. You have to apply some probability rules and sound money management which would keep you from making irrational decisions when you are loosing or wining and you must do that in demo account.

Risking a fraction of your balance

Loss means stress and frustration, winning means excitement and joy and you will only be able to control those emotions risking a fraction of your balance. It‘s very hard to keep risking small part of your demo account balance and you will always be tempted to "play big“. If a successful trade probability is 60% you still cannot risk 20% of your balance, because you will loose everything in just 5 successive losing trades. And you can never be 100% sure that your next trade is a winner; forex will never give you that opportunity.

There is no easy money

Hence, remember – there is no easy money in forex, greed and stress are not welcome in forex investment. If you want real trading, be ready to face some psychological pressure, which cannot be fully experienced in demo trading account.

Trading Concepts and Mechanisms

Currency Pairs

Currency prices can only fluctuate relative to another currency, so they are always traded in pairs. Two of the most common currency pairs are the price for euros in US dollars EUR/USDand the price for the British pound in US dollars GBP/USD

Forex Trading vs Stock Market

Two of the main differences between (and some would say advantages over) the forex market compared to the stock market are:

Forex Trading Hours for Major Currency Markets As mentioned above, the forex market is open 24 hours a day, five days a week (with limited trading during weekends)

Tokyo: 19.00 to 04.00 EST

New York: 08.00 to 17.00 EST

London: 03.00 to 12.00 (noon) EST

Sydney: 17.00 to 02.00 EST

How Forex Hours Affect Your Trading

There are four major currency markets and time zones that drive the majority of the worlds forex trading: USA, Europe, Asia, and Australia. The forex market opens in Tokyo at 23.00 GMT on Sunday and closes 5 days later at 10:00 PM in Chicago, ending the so-called forex trading week.