Forex Online Trading Help

Forex Demo Account Trading Your Way to Success

Forex demo trading, or sim-trading (simulated trading) should be one of the very first things you need to do in your Forex trading career.  It is vital to your success. Why? Because you need practice with the foreign exchange if you want to make money.

All good Forex brokers offer a free demo account, which allows you to test all aspects of your trading plan.  It allows you to test:  your brokerís trading platform, your own trading plan and system, your trading psyche, and the markets in general.

These demo accounts will give you 30 days to do your testing.  However, if you need extra time, all you need to do is ask the broker to extend your demo time.

Demo trading allows you to test your broker’s trading platform.

Every broker will have a few different trading platforms available for you to use in your trading career.  You should test these platforms with the demo account so that you can become familiar with the functionality of the platform itself (such as how to enter trades, charting features, and reading the quote screen).

This is vital to help you when you decide to switch to live trading with real money at stake.  The last thing you want to do is not know how to get out of a trade when the pressure is on!

Demo trading allows you to test your trading plan and trading system. (You DO have a Forex trading plan, right?)

The goal of a trading plan is to help keep you on track with your trading goals.  The demo account allows you to trade your plan without the risk of losing any real money.  This gives you the opportunity to test your plan and various trading strategies.  It allows you to test and hone those strategies so that you have a better chance at making successful live trades.

Forex demo trading allows you to test your trading “psyche”.

It is a very common statistic that states trading is 90% psychological.  Trading is a battle of the mind.  Every trader suffers from this battle.  But it is the trader that can control these psychological issues that is successful.

Some of the psychological challenges are a fear of losing, a fear of pulling the trigger, trading what you think versus what you see, etc.  These can keep many traders from achieving success.  By demo trading, you can start to control these fears.  The more you practice controlling these fears with the demo account, the more likely you are to control them when you trade a live account.

Demo trading helps you learn the markets in general.

There is no better way to learn the markets, to learn the various currency pairs than to educate yourself with actual screen time.  By simply watching the way the markets move day after day, you will begin to see patterns in those movements.  You will also begin to understand how your particular trading style fits with the markets.

Use the time your broker gives you.  By doing so, you will be much better prepared when you decide it is time to make the move to live trading with real money.

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The foreign exchange market (or Forex market, spot market, or FX) is a currency exchange market.

When you trade the Forex market, you are simultaneously buying one currency and selling another. Currencies are traded through a broker or dealer and are traded as a pairing.  An example of these pairings are:  the Euro Dollar and the US Dollar [EUR/USD], the US Dollar and the Japanese Yen [USD/JPY], and the British pound and US Dollar [GBP/USD].

Some of the most popular currencies are the US Dollar, the Euro Dollar, the Japanese Yen, the British Pound, the Swiss Franc, the Canadian Dollar, the Australian Dollar and the New Zealand Dollar.

These currencies can be traded 24 hours a day.  But there are optimum times to trade depending on where you live.

For example, in the U.S., the time from 8:00am EST to 12:00pm EST, there are two major markets open:  New York and London.  If you are a night owl in the U.S., then the two markets you want to look at are Tokyo and London, from 2:00am EST to 4:00am EST.

The goal when trading the Forex market is to exchange one currency for another in the expectation that the price will change. Whether the price goes up or down, you can take advantage of the change (by either going long (buying) or going short (selling).)

There are many advantages or benefits to trading the Forex market versus others.

First, there are no commissions.  These include no exchange fees, no clearing fees and no broker fees.  Unlike other markets, brokers are paid via the bid-ask spread (the difference between what a currency pair is being bought and sold for — also known as pips.)

Ease of entry and exit.  The Forex market is an extremely liquid market, meaning that you can enter and exit a trade at the click of a button.  Compare that to other markets where your order may not be filled because of the lack of participants.

Leverage. Even a small trader, with limited funds, can control a large amount of currency. For example, a trader with $100 and a 100:1 leverage ratio, can control $10,000 worth of currencies.  Leverage can be a great thing with proper money management and discipline, but can also be deadly if not treated with respect.  While leverage can be as high as 400:1, it is not prudent to use such a high leverage unless you are seasoned and have developed a good trading strategy with consistent positive results.

More About Pips

The type of account you choose to open will help determine the pip value.  For example, a standard account or standard lot is based on $1,000 per lot traded or $10 per pip, if your leverage was 100:1.  In other words, you will need a minimum of $1000 of unused margin in your account per lot traded.  On the other hand, if you were to open a mini account, you would need $100 per lot traded at $1.00 per pip, if you had a leverage of 100:1

So if you want a liquid market with the ability to trade literally 24 hours a day, and you have discipline, the Forex market can provide you with the opportunity to make money trading online.

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