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Demo Trading

DEMO TRADING or paper trading involves normal fx trading activities such as entering into buy (or sell) trades, setting stop orders, and exiting the market. It's basically the same as actual trading except for one crucial difference: You're not trading with real money.

It allows new traders to familiarize themselves with the brokers' trading platforms - for example, to learn how to place buy and sell orders, as well as how to set stop orders etc. It's a common occurrence for new traders to enter into a buy trade when they want to sell, and vice versa. Without a paper trading account, they'll be paying for such simple errors with real money.

Most says that one of the best ways to check out Forex trading and see if it is truly something that you like and feel that you can make money in is to open a forex demo account. This strategy allows you to view the account online and see how the account would perform if it were a real account.

The vast majority of reputable brokerage houses offering Forex Trading make these accounts available because they know that if you study and learn how to trade effectively you will be comfortable making larger trades, which in turn will make them more money. But of course, there's limit for demo trading.

Like other things, Demo Trading has disadvantages as well which will be tackled in my next post.

Happy New Year everybody!

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16 comments:

Danielle said...

Great post. With all the disadvantages mentioned, I still believe in demo trading. It is important, however, to trade the same amount of virtual money as you would trade with real money. That way you would not get any illusions.

cady said...

i had never heard of demo trading before. i'm not very well-versed in business. thanks for the information!

Sadie said...

My husband's friend does this and has tried to talk us into doing it. My husband says that once we save up some money he wants to get into trading but I want him to try this first. I'm glad to read a little more about it!

Scott said...

Thanks for the post, I will have to test this out as I have often thought about dabbling in the forex trading.

Emily Veinglory said...

I think it is a very good idea to demo trade, and to decide ahead how long to do it--a reasonably long period of time. Otherwise people can get short term gains and jump to the real thing too soon.

Julie said...

That's pretty cool for newbies to test out before diving in with real money.

Owen Cutajar said...

Demo trading is a pretty essential tool to learn how to trade in my books. You can read all the theory there's no better way than to actually try placing trades yourself.

BarbaraRae said...

What a great way to be able to see how good your trade choices would perform, before actually committing to using your real money!

Janet Giacoma said...

Wealth building strategies come in all forms - and while I'm not a Forex trader, I do appreciate your informational posts (just in case I ever change my mind!). Happy New Year!

Connie said...

I don't feel comfortable with doing any stock trading at all, even if it isn't online. I feel like it's gambling.

Daria said...

Demo trading is new to me, too. We can never stop learning, can we??? :)

Happy New Year!

Maureen said...

I have never personally done Forex trading but I believe that doing demo trading is a must. Like anything that takes knowledge, strategy and skills, you need practice or your odds of losing are much higher.

Diane Scott said...

Should I ever get into Forex (and I doubt it but you never know), I think demo training sounds like a great idea. Get your feet wet first, before committing your cash. Good post!

Samantha and Mr. Tigger said...

How cool!! You get to try before you put real money up so you can test it! Thanks for the post! It sounds interesting!
Your FL furiends,

Doublebanker said...

Got my but kicked in a FXCM managed account earlier this year. Are my losses for the past year tax deductible?

valmg said...

I'd not heard of demo trading either but it sounds like a great way to learn without losing lots of money.
Happy new year!

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