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Learn By Hands On Forex
Trading: Demo Accounts Vs Mini Accounts
If you are new to Forex, you are likely overwhelmed by the
sheer amount of information you are finding about currency
trading. Although the concept of trading the currency markets
is simple to understand, the actual trading methodologies and
understanding of how, why and when trades are executed can be
hard concepts to grasp and fully understand. If you aren't
aware by now, forex trading is not without substantial risks.
There are several schools of thought on how a new trader
should progress from learning to actual live trading. In this
article we will discuss the best ways for a new trader to
learn how to trade the forex and make their first live trades.
To start out, I can not stress enough the need for hands on
trading. This is why you will often hear it recommended that
new traders start trading with a demo account. What is a demo
account? Many online forex brokers offer something known as a
"demo account" which is a fake account that you can trade
until you feel comfortable trading your own funds. Demo
accounts behave just like real accounts, the only difference
is that the money you are trading is not real and no actual
trades are ever executed.
The purpose of using a demo account if you are new to Forex
trading is to get you comfortable making trades and to help
you become familiar with the brokers trading platform. You can
cut your proverbial teeth so to speak without risking any of
your own funds. This makes demo accounts good for a brand new
trader who just wants to see how trading works. There are some
drawbacks however to using demo accounts to learn Forex
trading.
The biggest downside to using a demo account is that you will
likely only be able to trade standard size accounts with a
demo account. If you intend to trade mini accounts, as many
beginning forex traders do, a standard size demo account is
going to behave differently than a mini account. Your margins
are very different for a standard account versus a mini
account. If you become accustomed to trading a standard size
account, your trading methodologies will show it. This is
because the larger margins offered on standard size accounts
allow you to take greater profits from smaller movements in
currency prices.
The other major downside to trading with a demo account for
learning forex is that as a trader, you need to carefully
manage the emotional aspects of trading real money. Since a
demo account is fake money, detachment is easy to come by.
Once you start trading your actual funds, you might just find
that your tolerance for risk is much more conservative.
Ideally, as you are learning to trade you are also learning
how to manage your risks most effectively.
So what is a beginning trader to do? What is the best way to
learn to trade the Forex, hands on?
Once you have read, studied, and completed any courses on
Forex trading that you may be taking, you are ready for
probationary live trading. The single best way to trade the
Forex is to just Do it. Now, this does not mean to jump in and
trade a full size account with real money, this would be an
enormous risk for a new trader and not a very smart move
indeed. What you can do is to find a broker that offers mini
accounts. Mini accounts typically start at $200 and typically
give you 100:1 leverage. That said, as of this writing, there
is one broker (Easy-Forex) that allows you to trade a live
mini account for as little as $25.
For less than you paid for any of your books, courses or
training materials, you can actually try live trading. You
will be amazed at how after just a few trades, the stubborn
concepts seem to start making sense and you begin to
understand Forex trading.
Now, if you do decide to begin your trading with one of these
tiny mini accounts, you should start by making several very
small trades. You should also be trading with the same system
or methodology that you are trying to perfect. Your profits
will likely only be a few dollars since you are trading on a
small margin. This is good, however because the reverse is
true as well, you are only ever risking a few real dollars. If
you happen to have a series of loosing trades and wipe out the
funds in your demo account, you can consider it the least
expensive education you could possibly get in actual forex
trading. Much better than loosing large sums of funds, and
more realistic than trading a demo account. Just learn from
the experience, and consider it a good deal on a valuable
lesson.
Once you are comfortable trading your mini account, you can
always have it converted to a regular account (with an
additional deposit) if you choose. Overall, it cant be
stressed enough, the best way to learn the Forex is to have
experience with live hands on trading. This article showed you
ways that you can do this at a minimal cost and with the
smallest amount of risk.
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