Free demo accounts are a valuable asset for anyone considering forex trading as a career. They offer first hand experience of how currency markets operate without the obvious risk of incurring any losses. However, once you make the plunge into live FX trading, particularly when you’re making the first trades, you’ll often experience far greater losses than if you had been using the free demo account for beginners. Why is this? And what can you do about it?
There are various reasons why traders are less likely to profit on live Forex accounts. One is inexperience. For some people it’s not so easy to grasp the complicated workings of the Forex markets because they haven’t traded for long. This means they lack both the skills and the knowledge to make informed decisions with real cash. This also means they’re less likely to fully understand the factors that affect currency prices, particularly relating to interest rates and government policies.
But inexperience isn’t the only problem. Many beginning traders come into the forex markets naively expecting them to do well because they have experienced ‘warm’ trades. In other words, they expect the market to behave like a casino and win immediately and without strategy. Some traders make this mistake without even realising it. They believe they know how the currency markets work and so they simply follow their instincts and make trades that will ensure they profit. Unfortunately, they often don’t know how to exit these trades, meaning they stay in the losing position for longer than they should.
Another problem is inexperience with indicators. Many beginning traders are unaware of the fact that one of the most important tools they need to become successful in the markets is a moving average filter. A moving average filter can be extremely useful because it gives traders a tool to help them find profitable areas of the market to invest in, allowing them to stay in those areas and see what happens to prices over time. However, many traders buy into the popular myth that using moving averages is all they need to become successful.
This myth often means that traders open up several demo accounts to get better strategies and learn about forex trading better before they commit to real money. But the problem is that, while demo accounts may offer some useful indicators, they usually do not offer very accurate readings and can be prone to inaccuracy. This means traders are wasting time trying to use moving averages incorrectly. This can lead to huge losses and frustration. This is why it’s strongly recommended that anyone who wants to get started in the forex markets opens a free demo account and practice trading until they feel confident enough to start investing real money.
Another common myth is that traders can use moving averages to effectively stop loss and make profit. This is another mistake that is often made during free demo accounts. While it’s possible to set up your forex trading software to use moving averages, they don’t have any real-time value. When traders use these indicators in live trading, they risk losing money because they react too late. This means traders have to rely on other factors such as volatility, risk level, currency pairs, and market conditions in order to determine whether or not they should invest in a particular trade.
Finally, traders can lose money with forex demo accounts simply because they don’t know how to read the charts. Most free demo accounts provide a platform for beginners and intermediate traders to learn about price action and analysis without putting their money at risk. As soon as a beginner begins to invest in real time, however, he or she has to learn about indicators, as well as learn how to read the various charts. Most experienced traders also have their own visual cues to help them determine when to enter and exit trades. So, while a forex demo account can provide a quick learning experience, it’s not a place for experienced traders to lose their money.
It’s not realistic to think that forex demo accounts will provide all of the information that is necessary for beginning traders to become profitable. If you’re just starting out, it’s wise to keep your money in a safe place and learn as much as you can before risking it with real money. If you do decide to start investing in the Forex market with a free demo account, make sure you do your homework and know what you’re doing. If you do that, you’ll be able to tell when to get out of a trade and when to stay in it.