Basics of Forex Trading Demo Accounts

The foreign exchange market is a decentralised market in which the dealers can disseminate through their own price feeds, with the help of proprietary trading platform. Before committing real funds to an account, it is extremely important that you know the features of each trading software. In the forex market, you can test each platform by using demo dollars. In the forex market, the customers are offered to download a free version of its software, by every reputable forex dealer. Here is a short discussion about the importance of trading in a demo account.

Basic v/s integrated platforms
In the forex market, there are some platforms that offer everything such as news, charting etc. There are many others that have simple layouts. They focus only on order entry, price quotes and reporting.

Placing orders
Before trading live, always try out the dealer demos. This way, you can get familiar with various features of various trading platforms. For instance, some platforms mark the order on the chart, while others use only pop-up tickets. Generally, in order to sell a currency pair, you have to click on the bid part and in order to buy a currency pair, all you have to do is to click on the ask part. After the quote window pops up, some platforms allow you to select market or limit orders. But there are other platforms that force you to make selection beforehand.

In order to master the specifics of order entry on each platform, it will be a really good decision to place at least 25 trades on each platform with demo money. You should never trade live unless you are confident enough.

The taxman cometh
Tax reporting is the one function that most forex traders tend to overlook. The tax authorities are not provided with any documentation by the dealers in the trader’s country of residence. This is because of the fact that the forex market is a global and unregulated market. The traders are responsible for tax reporting. Detailed transaction histories are provided by the dealers. This transaction is produced in an electronic format. From this, the traders can compile their own tax reports. This requires a trading platform that has flexible reporting functions and is highly organised. But the quality of reporting differs greatly from dealer to dealer.

Trade like it’s real
Once you have understood and mastered the mechanics, the demo platform can be used to experiment with different trade styles and sizes, in order to determine your trading personality.

Some of the worst traders I have ever known traded on demo too long. Demo trading is like a 14 year old day dreaming about driving. Not going to help one bit on the freeway.