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For beginners trading in forex demo account

I have written this article mainly for traders who already know what forex trading is, have opened their forex demo account and have traded for a while. Now the word "a while" has a very relative meaning in forex context. One trader might have traded successfully for a couple of months and with some knowledge and experience developed his own profitable system and forex trading strategy with sound money management. I am not talking here about 20% or even 10% balance risking for one trade.

You have to leave your emotions outside your trading account

Another, less lucky trader, might still be struggling on finding his method of trading. In fact, he might never have the abilities to trade in forex. Yes, you could be the one who should never participate in this particular money making business. Why? Because it's a kind of a psychological game of probabilities. Just because you are never sure, if you loose today, tomorrow or even for the whole month. If it frightens you,I think you would be better off working somewhere, where you know exactly what you will get for your hard work. If you want to be sure, what you will get per hour, per day, per month, etc. - forex trading is not for you. On the other hand, if you are very jumpy, you throb into tears finding out that you lost 100 dollar bill while walking down the street or jump out of joy when you accidentally find a dime - trading forex investment might not work for you as well. You have to leave your emotions outside your trading room. If you can do that - you will succeed.

So emotions out, and your forex trading system in

So emotions - out, and your forex trading system - in. If you have traded enough or for a while in your forex demo account, you should have developed some kind of profitable forex system. You must already chosen currency pairs to trade with, you know when to place stops, when to close your positions, what profit/risk ratio to choose, what forex indicators to use for entering or exit, when not to trade and when to double your positions and make a pyramid. You should also take into account the use of economical and policial news, because that's what drives the market.

If you have some kind of forex trading strategy - fine, but have you been testing it long enough in demo account?

You must have also developed your complex strategy for at least a half a year. I would personally test it about a year. Why so long? For bigger part - because forex currency pairs' movements change drastically in a couple of months, not to mention years. New strong currency trends appear and they can last for a year, or the opposite - flat movement lasting the same amount of time, and whipsawing every trend trader. If you have some kind of trading strategy - fine. Everyone of us has. The question is, have you been testing it long enough in your forex demo account? Did you experience all the "surprises" the fx market has in store for you? For instance, if you apply breakout strategy - you will be lucky to jump in the early rising or falling trend and make some pips. However, what if a trend has exhausted? What if it will move sideways a couple of months? You might be seeing indicator supported visions that it will brake the old trend line and move in the opposite direction. Consequently, you will continuously be placing loosing orders due to the breakouts of tops or bottoms, which will be followed by powerful reversals that will wipe out your stop loss. You must me adapted and used to currency trend changes, sudden price jumps, currency interventions, shocking news release and this experience comes with time, patiently trading in forex demo account. Even if you trade in a small time frame, like 5 minutes - even then it's not enough to trade successfully for a short time period.

I know one trader who has been trading for 5 years and he has been a very successful trader. He has been using a very small time frame forex trade signals, and a pipsing strategy, which I thought was invincible to rapid and big movements. However, during the last eur/usd fall for 3000 pips during 2009 - 2010 he lost everything he earned in those 5 years. What makes you think, you are better than he is? He now is looking for some money to invest further in forex, because this huge trend is finally ending, and we might see some bigger correction (this is only my guess). His pipsing strategy could be profitable again, but the only difference is that he has no capital to invest.


Are you able to identify the timing of your strategy use?

You should sit still and do nothing if your strategy is based on particular price movements and these are not present so far. You can only use those methods when the price itself along with indicators confirms the movement change.

I do not even mention about the profitability of your trading system in the long run. You only switch to real account when you trade profitably in your forex demo account, that is very important. If you have several forex systems and those do well in different times and price changes - good, but be careful as to identifying those changes.

The last, but not the least - profitable trading with small leverage and risking less than 5% of your capital with your forex demo account. This is arguable, of course, but that is only my opinion. If you are still very itchy, you might try some forex micro accounts that are now available. They give you the opportunity to trade with a fraction of one dollar and a few dollars investment is, I believe, possible to everyone, to say the least.

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