The Importance of Demo Accounts – A Brief Introduction

When you consider that the forex market turns over in excess of $5 trillion in daily transactions, you begin to understand the true magnitude of this sector.

Make no mistake; however, this accessible market is deceptively complex and one that can be overwhelming for newcomers or novice investors to master.

In this article, we’ll offer a brief guide to forex trading, and ask why the use of demo trading accounts can be so important in determining your success or failure. 

Bridging the Gap between Theoretical Learning and Practical Experience

They say that knowledge is power, and nowhere is this more relevant than in the forex market.

While having a broad base of theoretical knowledge may be central to your success, however, the biggest challenge is often building on this foundation and translating it into practical experience.

This is where demo accounts come into play, as these unique entities bridge the gap between theory and practice without requiring you to risk your hard-earned capital.

Demo accounts, which are available through reputable online brokerage sites such as GKFX, essentially simulate corporeal and real time trading conditions through your dashboard. In this respect, they’ll replicate almost every element of an actual online trading account, from the analytical tools that you use to the way in which you execute orders.

In fact, the only difference is that you’ll trade using fake currency, enabling you to reserve your capital and eliminate risk until you start to invest for real.

You can usually access your demo account for between three to six months, and during this time you’ll test your various trading strategies in a safe and insightful learning environment. This way, you’ll learn precisely what does and what doesn’t work in the physical market, before honing your strategies to optimises your chances of success.

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At the end of this period, you’ll transfer what you’ve learned and hopefully translate this in frequent and long-term gains online.

The Bottom Line

Even on a fundamental level, demo accounts enable you to get to grips with the mechanics of daily trading and avoid the type of mistakes that rookies are inclined to make.

Demo accounts also help you to grasp the basics of high frequency trading, by allowing you to use risk management tools such as stop losses and strike the ideal balance between risk and reward.

Regardless, the use of demo accounts should be a no-brainer for novice forex investors who are looking to profit in the marketplace. After all, not only is this resource free, but it also represents a critical step in the education of financial market traders.

Ganesh Kolekar is a graduate and geek. He is the man behind keeping the quality of the posts and manages the content part on the website.