Forex practice account is only for newbies; that is what the majority of people believe. However, that way of thinking is not 100% correct. Actually, even pro trader still use these accounts from time to time since they can be used for other purposes. Here are some ways to use forex practice account:
- Learn how to trade forex
Definitely, this is the basic purpose of such account (apart from promoting the broker service obviously). In a demo account, a novice can trade virtual money without being worried about losing anything. It is also a good place to get used and learning the trading platform of their choice and find out how currency trading works.
- Testing a broker service
Trading platform is your heart in trading currencies, so utilizing a practice account to see the functionality of the trading platform is a good idea. There are a few essential points to think about here:
- Does it have a good user interface? It is very important that you could access to any function that you need in the shortest time possible and with the simplest possible way. You really don’t want to click around multiple buttons across the screen just to execute one order.
- What about the features? There are several trading platform that just provide you with simple charting feature and a few indicators, but you can also find others that offer quite sophisticated features. It all depends on your trading strategies and how you analyze the market.
A number of forex brokers offer identical trading platform (example: MetaTrader4 or MT5). In cases like this, try to have a look at their connection. Could you execute an order without having any difficulty? Do your stop loss and take profit order were executed accurately? Naturally, the condition may be different in a live account, but it is still a good indicator.
- Testing strategies, signals, and expert advisor
Despite having trading systems that work, a professional trader will invariably willing to test new techniques and strategies. In a forex practice account, they’re free to test as many strategies and automated trading system that they want. This is actually essential since a mere backtest result simply cannot ensure 100% that the strategy willl work in the current market.
Note that if you’re testing a forex robot, you still need to spend a little on VPS (virtual private server) to host your robot. Also, don’t be rushed in deciding whether a strategy or robot is profitable; I suggest you test them for at least more than a month before decide anything.
As long as you’re still a trader, you’ll need to use forex practice account for those purposes. Once you realize this and learn to use it wisely, you can reduce your risk from low quality trading platform, bad strategies, or scam expert advisor.
