How to Use a Forex Demo Account

By Charles Hopkins Published 10/14/2006 | Finance

The Forex market is the one concerned with the simultaneous buying of one currency and the selling of another. Transactions occur in pairs of currencies, and speculation is the prime driving force behind 95% of the Forex.

The true trading platform of the Forex is open only to large financial institutions with a high net worth, and to governments. However, a smaller, secondary Forex market is open, where trade brokers transaction the currencies, and where the general man can also enter to transaction. This has been possible since 1997, when the market was opened up.

With the event of the Internet taking over most of the transactions in the Forex market, it has become increasingly easy and accessible for anyone who wishes it to dive into Forex trading. This 24-hour opened market is available all over the globe through the net, and people have started to be more and more intrigued by the Forex. Indeed, one of its major characteristics is that it provides the largest profit in all legal types of transactions. This has been more than a lure for many.

However, entering the Forex platform is not as easy as it sounds. Sound financial knowledge is required, and understanding the data pertinent to Forex and its trends and changes is not everyones cup of tea.

This is where many Internet brokerage firms have come into play. They help registered users to decrypt all of this information and technical jargon, and offer to help in real time to have the customer set his own trading account, and start to trade the Forex floor.

These companies offer real trading accounts whereby anyone can start trading the Forex. But the companies also provide free demo Forex accounts. This is a fake account, with pretend funds, but which trades upon the live Forex market parameters.

Usually available for 30 days free of charge, a demo Forex account allows the customer to learn how to trade his funds, and at the same time, understand the trends, positions, strategies, and pitfalls of the Forex market. The customer can test his trading skills on this demo account without having to worry about the funds,since these are virtual and are not real. He can test strategies, and if he makes a mistake, he will be able to go back over his transaction and figure out where the error was made.

Demo accounts simulate the reality of the Forex market, and allow a potential trader to test the waters of trading, especially to see if he is cut out for that position. On top of providing this simulated account on the live Forex background, demo accounts also come with all of the information and data that accompanies a real trading account. Charts, patterns, analysis, and rates are all provided as per the real market, and the demo account allows the trader the time and leisure to really understand and figure out all his information, and make the best decision as to a transaction. Besides, alongside the demo account, the Forex trading firms provide assistance to the trader, whereby he can question any chart, ask for guidance, or for more explanation.

The Forex demo account allows the trainee, trader, or newcomer to really grasp the threads of the Forex market before stepping out into its world and manage real money and trades.

A demo account is also often proposed alongside a real trading account. Traders can thus practice on the demo account, and can use it to test strategies, and simulate the transactions of the real account. It thus provides a very efficient tool in further understanding the Forex market.

Most demo accounts operate on the same trading interface as the software proposed by the website it belongs to. It is thus a tool to help the newcomer to understand and grasp the platform he will be using when he is trading with his real account, by already putting him into the actual environment he will operate in.