Many beginners who’d like to trade currencies don’t know what to do with a demo account. Is a demo account a perfect simulation of market conditions? Since the price quotes are the same in both live and demo trading, many seem to subscribe to the notion that demo trading replicates the conditions of live trading exactly. This is not true, however, as we discuss in this article.

      1. Demo trading is different from live trading.
Demo trading is free of risk, as we all know. Yet the rewards of trading are the result of risks calculated and accepted in accordance. A trader assumes the considerable risks involved in trading the forex market by opening an account, making conjectures about the market, and testing them. None of this, of course, is possible in demo trading. Most importantly, the emotional aspects of trading are completely absent. Even if you wipe out your demo account, you can always start from the beginning with fresh hopes, but how often can you afford to do so in live trading?

      2. Demo trading is good for getting used to the basics.
So what is the use of demo trading? If you do not know what an indicator does, if you have questions about how to apply a particular money management strategy to your trading, or if you just want to see how forex trading is done, demo trading is an excellent choice. You can understand all that is going on in the market, and you may also decide if you can cope with  the sometimes difficult conditions of the market by trying a demo account.

      3. But for a real grasp of actual market conditions, a mini account is a must.
Yet none of that means that demo trading can substitute for a real account. A demo-trader is never a trader, but more like a game player who can keep reloading the game from the beginning an unlimited number of times.

      4. Do not get too excited about your skills if you do well in demo trading.
The only proof of your ability in market conditions is live trading, and the best way of trying that is opening a mini-account. Don’t get too excited if you get yourself rich with a demo account. Success with a demo can be very entertaining, but has little relevance to real trading results.

       5. Increase your risk step-by-step.
In short, when you want to decide how you will be trading forex, forget about the results of the forex demo, and focus your skills on controlling the risk that doesn’t exist in the demo-account. Only if you do well in that environment can you justify increasing the limits of your risks.

Not all demo accounts are the same of course, and you may do yourself some favor by reading through some reviews of forex brokers and their software, and choosing one of them after careful consideration. Make sure that you don’t rush the task:  the more solid the beginning, the more productive the results will be.