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Forex demo accounts

So having considered all the various aspects of the $orex marketdetail, the types of forex brokers available, the importance of forex charts, and our choice of $orex tradingategy, its now time for us to start thinking about our $orex demoount, which of course will be dictated by one or more of the above factors. Once again, and without wishing to sound cynical, it is important that you realise from the outset, that the forex demo account is nothing more than a shop window, a marketing tool for the forex broker, and therefore as such, will be disguised in several ways to ensure that you have a good experience, and ultimately convert into a live account. This is not to say that all brokers operate in this way, but many do, and what appears in the shop window, may be very different once you are safely added to the client list and losing money as a B book customer. So what are the things to consider when choosing your forex demo account, and ultimately your forex broker?

Forex charts

Whatever trading strategy you propose to use for your forex trading, you must have an independent charting package. Why? First, you will never see any of the price manipulation in your demo account charting package, if you are using the free one provided by your forex broker. It would not be a great marketing strategy, to show price frozen screens, spikes in data, volatile spreads, and price manipulation on your stops, as this is the shop window. In short, the execution on your demo account will be perfect , unlike the real thing when you go live, so this is the place to check out your brokers charts, and subscribe to your reference charting package. This will tell you how good or bad the charts are on your brokers platform, and if you do continue to open the account later, only use your trading platform to open and close positions, not for charting analysis.

Forex strategy

Having decided on your forex trading strategy, then make sure that the demo account you are using allows you to test your strategy, and if you are unsure, contact the broker direct and check carefully, and keep a record of any conversations( live chat ) or emails for later reference. If the broker does not allow your strategy, then simply move on and choose another broker. Of course, there is always the option with any trading strategy to open two accounts. With the simple pairs correlation strategy one could open a long position in one account, and a correlating position in a second account, but this will require two accounts to be funded which may not always be an option for the novice trader. I have several accounts which I use for different purposes – some are very short term strategies such as intra day, whilst others are much longer term following the trend, as the forex markets are one of the strongest trending markets available.

Forex platform

As a general rule the simpler the trading platform then the more likely you are testing a platform from a market maker, which will almost certainly be a white label from someone else, with poor charts, and fixed spreads, but lots of support materials and market news. The more complex the platform, then the more likely it is an ECN broker. The market makers will tend to use very simple platforms designed for the small retail investor, while professional traders will use proprietary platforms of which metatrader is the most popular (MT4 and more recently MT5), which I use myself, along with several others.

Forex broker regulation

Before you open your forex demo account, you should check out your forex broker carefully by visiting one of the regulatory bodies which tries to oversee and control the behaviour of brokers. In the USA, the regulatory bodies are the CFTC ( Commodity Futures Trading Commission) and the NFA ( National Futures Association) and I would urge you to undertake a due diligence on your broker as part of your analysis. In the UK the regulatory body is the FSA ( Financial Services Authority ). As I have outlined elsewhere, the US authorities in particular are trying to protect consumers from themselves, by reducing leveraged accounts to a maximum of 1:100, still too high in my view ( I trade at 1:50 ) and also have recently introduced much higher capitalisation rules for online brokers. As a result this has driven some forex brokers off shore into unregulated countries, making due diligence even more important. You will also be surprised ( if you spend some time on these sites ) at the number of trading violations that most large brokerage accounts have listed against them, and all have been reprimanded for the following :

  • Slippage execution when none was occurring in the market
  • Advertising commission free trading
  • Claiming segregation of client funds, when in fact this is not the case
  • Changing prices after execution

There are many more, but you will be surprised, which only goes to prove my point – you are swimming with the sharks and if you don’t protect yourself with a diving cage first, then you will get eaten – alive!

Forex demo account timeout

Finally you will find that many demo accounts time out after a short period, so try to find one that doesn’t, and allows you to test your strategy for as long as you want, and not for the brokers benefit. The reason many time out, is simply that the broker wants you to start losing as soon as possible, and not hanging around in the forex demo account for weeks or months, so it is in their interest to get you converted as quickly as possible, but don’t be hurried, and if you want to continue, simply ask for an extension, and if they say no – move on to the next one!

I hope you have found this site to be both useful and informative and thank you so much for taking the time to read to the end! Good luck with all your trading, and I hope that the above advice rang a chord somewhere – it is based on my own real experience in these cut throat markets, but I have managed to survive ( somehow ) and tell the tale. Good luck and thank you once again – kind regards Anna