Before
airplane pilots actually fly on their own, they usually practice in
simulators that re-create what flying will be like without any actual
risk. Since currency trading is as dangerous financially as flying is
physically, it makes sense that there would be a forex demo
available, too.
A
forex demo is a smart way for a new investor to start. Reading books
and taking online courses can teach you the basics, but the best way
to learn anything is to get some hands-on experience. However, with
forex, hands-on experience could mean losing your shirt. So a demo
gives you real-world training with no actual money being involved.
Usually,
the demonstration comes courtesy of a brokerage or other financial
Web site that has an interest in currying your favor. The plan is
that once you’ve tested your skills in the demo, you’ll get into
the real thing and take advantage of the paid services the demo
provider has to offer -- forex signals, managed accounts, automated
trading, etc. The demo is like a free sample, offered in the hopes
that you’ll enjoy it so much that you buy something, too.
For
that reason, be should be highly suspicious of any Web site that
wants to charge for a demo. Considering there are literally dozens of
sites that offer free demonstrations, there is absolutely no reason
that you should pay for it.
When
you sign up for a forex demo, you’re given a username and password
and shown how to use the demo system. Sometimes it involves
downloading a piece of software unique to the company; other times
it’s simply done over the Internet. (Some demos require Macromedia
Flash, which most browsers have installed, but which you’ll need
the latest version of.) You determine how much imaginary money you
want to start with, and off you go!
Once
you’re signed in to the forex demo, you do all the things you would
do if it were a real-world situation: reading the charts, following
the trends, visiting online forums to get other traders’ opinions,
and making trades. The trades are recorded in the forex demo only and
don’t go anywhere into the actual market since there’s no real
money involved. When the market changes, the program determines how
much you’d have gained or lost based on the decisions you made.
You’re able to say, “Whew! Good thing this was only for
practice!” or “Too bad this wasn’t real!” And once you’ve
gained some expertise using the forex demo, you can move on to the
real thing and start making some money for real.