What is a Demo Account in Forex Trading?

FXOpen

Trading in the international currency markets has a reputation for being risky, but it is just different from other markets. In FOREX trading leverage or borrowed money, is almost always used. A demo account will help traders to learn how to use leverage, without facing losses during the learning process.

Traders who have been successful in other markets may be used to using some amount of margin, but using leverage is different. Some but not all FOREX brokers offer a demo account to new clients, and trading with one is a very good idea.

The idea behind a demo account is simple: a broker will create an account on their platform which is credited with money that does not exist in the real world. You will be able to trade on their platform as though you had a real account, but instead of winning or losing real, fiat, currency, your demo account will just be for practice.

How Does a Demo Account Work?

Trading strategies like ‘buy and hold’ aren’t going to work as well in the world of leveraged trading. A demo account will give fresh, perhaps inexperienced, traders who are learning leveraged trading to try out strategies without putting any money at risk.

When a broker opens a demo account for you, an account that is identical to a real account will be created and funded with fake money. You will be able to trade with the actual server and trading platform that the broker uses, but there won’t be any gains or losses recorded in actual currency.

A Demo Account Has Benefits for FOREX Traders

A demo trading account on a currency, or CFD, trading platform is a great learning tool. Most people don’t have a lot of experience with professional trading platforms or using leverage in their trading. There are a lot of new things to learn when trading the global markets and a demo account make that process a lot easier.

In addition to learning new tools, many traders find that using trading strategies in the FOREX or commodity markets is more profitable than in unleveraged trading. It is very easy to work with trading strategies using a demo account, and become accustomed to how trading with leverage differs from trading in a cash market.

How Can I Use a Demo Trading Account?

Most FOREX brokers will prominently display the option to try out a demo account with their company. Every FOREX broker will be different, but most will require that you supply some personal information, as well as an email address.

Once you supply all the information that the FOREX broker requires, you will be sent information about how to log on to the FOREX broker’s server. You may also need to download a trading platform, although some FOREX brokers will have an online trading interface that you can trade with, most will use one of the established platforms discussed below.

Trading Platforms for a Demo Account: MT4 or MT5?

The two most common trading platform that CFD, as well as currency market, brokers use will be MT4 and the other one, with a very similar name, is MT5. Both are very alike, and most demo trading accounts will allow traders to use one, the other, or both.

If we look at MT4, and also at MT5, both offer the ability to use limit orders, as well as numerous other features. MT4 has been the industry-standard trading platform for more than 15 years, and there are many third-party programs that work with it.

It is important to make sure that your broker allows the use of trading software, as some brokers don’t want their clients using automated trading software(bots). There are also a host of analytical tools that work with both MT4 and MT5, some of which are available online for free!

Using MT4 or MT5 without having to risk real money is another big benefit of FOREX trading demo account. They are great platforms to use but will take a little while to get used to trading with.

Conclusion

It is a good idea to choose a FOREX broker that offers a demo account. FXOpen Broker offers free demo accounts for new traders, and also has account options for traders who just want to try the FOREX market out. Instead of having to come up with thousands of US dollars to open an account, FXOpen broker has accounts that can be opened with just $1 USD.

FXOpen broker also has full-ECN accounts that can be opened with just $100 USD, and offer raw spreads of as low as 1.5 pips. If you want to learn more about what FXOpen broker can do for its clients, or how to open a demo account, just click here for more information about one of the best FX brokers out there!

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65.68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.