Forex practice account: Usually Forex practice accounts are known as demo accounts, these types of accounts are designed to encourage traders to start investing in Forex market.
Most brokers offer practice accounts and they are usually for free. These accounts are almost like a real account but without risking any money; allowing for transactions to be made in ‘real’ market conditions.
This will allow for the trader to have a better understanding of Forex.
Advantages of a Forex practice account:
As a new trader you can test trading platforms and other software programs to find the one that matches with your preferences and needs. It is a good way to improve trading skills and eventually create an investing system to earn some money without losing any real money.
For new investors a Forex practice account provides the option of practice and to apply the knowledge gained by free e-courses and training material with no charge.
One of the most important things to learn is how to manage losses and prevent those losses. Besides all the information about Forex market issues, there is no information about managing losses and that is something that can be learned by the practice using a demo account.
By performing the practice sessions, the idea is to develop a solid and profitable trading plan. And also to learn how to make trading decisions by analyzing current market conditions and not making decisions based on emotions.
It is very easy to get a Forex practice account or demo account. Almost every broker will provide you the software that you need and the platform to place your trades, everything is done online. So what you need to start is basically a device with internet access and internet connection.
Disadvantages of Forex practice account:
As you are trading risk free, you can make ‘dangerous’ decisions easier because you won’t lose anything. Also you can be lucky and you can do well and ‘earn money’ with those decisions but when trading with a real account you may be overconfident and lose money.
It is better to practice like if you were in real risk of losing money, that way you will be able to have positives results when starting real trading.