Forex Basics

How To Practice Forex Trading Without Any Financial Risk

Let’s make something perfectly clear before we say anything else, you cannot trade without risk, there is no way to make any money without there being any form of risk. Risk is what enables us to have rewards and so when you trade there will be risks. Now that we have made that clear, there are of course a number of different things that you can do to help reduce the risks that you will be taking when you trade. Managing your risk is one of the key elements for being a successful trader and so it is certainly something that you should be putting a lot of emphasis on when you create your trading plans and of course when you actually begin trading.

The first thing that you can do is to work out how large the trades that you are going to be putting on are. Of course, this needs to be decided in line with your overall account capital. If you have a balance of $1,000 and a leverage of 100:1, there is no point in trying to put on huge trade sizes like 1 lot or even 0.5 lots, this will only result in disaster. You need to limit your trade sizes, the lower they are, the less risk you are putting your account under. If you are looking for the lowest amount of risk, then you will want to go for the lowest trade size which for many brokers is 0.01 lots. Of course, this will then limit your profit potential, so really you are going to want to look for a happy medium, somewhere with low risk but somewhere that also offers returns. In relation to just risk though the lower the trade size the better.

You then need to work out where your stop losses are going to be, yes you will be using stop losses. They are the primary way and method that we as traders can use to help limit our potential losses. If we do not use them, then even the smallest trade has the potential to blow an account, it will take a lot but it is possible, so why take the risk? Putting in your stop losses is a sure-fire way to protect your account, when your trade goes the wrong way and reaches the level of the stop loss, the trade will automatically close. Yes, it will be at a loss, but it is a controlled loss and one that was taken into consideration before the trade was even placed. What is important is that we removed any potential risk for further losses and have limited things to be within our strategy criteria.

We spoke about leverage near the start of this article, it is important to get a good understanding of how it works and if you want to keep the risks on your account as low as possible, then you will also want to keep your leverage as low as possible. Leverage allows you to trade with more spending power than the capital in your account, this, in turn, increases the profit potential of the account, which is the main selling point of leverage. What they don’t tell you is how this leverage also increases the loss potential of your trades too, the more leverage that you use the higher the losses can be with each trade and a loss can take away a much larger sum of money than it would have with less leverage. So if you have the balance for it, go for a lower leverage in order to keep risks low.

Pick the right currency pair to trade, it’s probably not a surprise to you that different currency pairs offer different levels of risk, there are three main categories, the majors, minors (crosses), and exotics. The major pairs have the least volatility and the most liquidity, the minors are in the middle and the exotics offer the most volatility and least liquidity. Due to this, it is far more profitable and also risks to trade the exotic pairs, but it takes a lot more skill to do it successfully. Due to this, it is recommended that those looking for lower levels of risk should look to trade the major pairs, things like EURUSD are extremely liquid which means that their movements are less rapid and sudden. They are easier to predict and if something does happen, you often have more time to react than with the exotics. So if you are looking to trade with lower risk, go for the major currency pairs.

One of the riskiest things that you can do as a trader is to trade during times of economic news, there are certain news events that new traders are warned away from, things like the US non-farm payroll, you should not be trading during the times of these announcements. They have the ability to cause large movements in the markets and even economic experts get their predictions wrong on a regular basis, if they get it wrong, then there is a good chance you will too. In order to avoid this risk completely, simply do not trade during the news events Obviously there is unannounced news that comes up every now and then which is unavoidable, but as long as you avoid what you can, you will be reducing the risk that you account is being put under.

The last point that we quill look at is the fact that you need to ensure that your expectations and your goals are realistic. If you have come into trading thinking that you will make thousands each month with a small starting balance then you are mistaken. Many people make it seem like you can and many people probably have, but they are risking a lot with every single trade in order to do this and have most likely lost countless accounts in the process of getting their one successful one. Bring your expectations down and you will remain motivated and feel less like you need to risk more to achieve those goals.

Those are some of the things that you can do to help reduce the risks that your account is being put under, remember that it is impossible to trade with no risks at all, there will always be some otherwise there would be no way to make any money. If you hate risks, then you will need to do what you can to help reduce them, but remember that by reducing your risks you are also reducing your profit potential, so the key is to find the middle ground where you are happy with both the risks and the potential profits that you can make.

Forex Psychology

Psychological Differences Between Demo and Live Trading

When you start out trading, often the first bit of advice that is given to you is to use a demo account, keep using a demo account until you perfect your strategy. While this isn’t necessarily bad advice, it is, however, advice that can lead you into a sense of false confidence. Yes, we agree that using a demo account is great, to begin with, however, there are a few things that you should keep in mind for when you move over to a live account.

Reduction in Emotion

When you are trading on a demo account, there is nothing to lose, which means all of the stress that comes with a loss is not there, make a loss and you shrug it off, blow the account, just open up a new one and all that money is back. This isn’t how it will work on a real account, each and every loss is you losing something of yours, this can be devastating to some, we have seen people lost thousands, others have lost $10 yet it can have the same psychological effect on someone and can be hard to take. 

These negatives can cause a snowball effect and can cause some people to chase losses which can lead to more losses and even account closure and debts. It can also work for winning, your first winning trade on a demo account feels ok, but nothing special when you compare it to your first winning trade on a live account, it is a fantastic feeling, just don’t let it get into your head, stick to the strategy and you will have many more wins, don’t start trading just because you are on a high of the previous win.

The Need for Greed

If you were to ask someone if they are a greedy person, they will 90% of the time say no, watching someone trade is a good way to see the truth. We touched briefly on it in the previous post, but when you make a winning trade, that is actual money coming into your account, real money that you can withdraw and spend, it feels great, but I want more. Maybe I could get more by putting in trade here or there, obviously, these are not in line with my strategy but they could make me more money. My trade is going the wrong way, let me just move my stop loss further down so it doesn’t close because it will definitely turn. My trade is going the right way, let me move my take profit level higher so I can make a bit extra.

These are all things that we have done on a live account, but never ever think of doing it on a demo account, simply because we can make some money. These are not good habits to have, you set these initial trades or limits for a reason, stick with them, do not change them just because you think you could squeeze a little extra out of the markets, the markets will not be afraid to take it all back from you.

Risk Elimination

This works in a similar way to the emotions, there is no risk when trading on a demo account if you lose, you aren’t losing anything, but in the same way, if you win, you aren’t actually winning anything (apart from the knowledge of course). On a live account, seeing your balance going up or down can have a huge psychological impact, when it goes up, you are full of confidence and on a high, but when it goes down, it can really impact on your confidence and desire to continue learning.

So how do you avoid these sorts of things? It isn’t easy, any professional trader will tell you that, the hardest part of trading is taking out the emotion and sticking to your strategy, especially when things are starting to go wrong. Ensure that you are sticking to your plan, you created a strategy on the demo account, stick to the exact same on a live account, think of it as a process and try not to look at the profits, you could even hide them on your trading platform. 

Ensure that you are using a trading journal, both on the demo account and on the live account, this way you will continue to use what is working and will be able to see if you are changing anything fro the demo account, allowing you to stop and move back towards your strategy.

It is a big change going from demo to live trading, but ensuring that you are fully prepared and taking your time not to rush into things are the first steps in becoming a successful live trader.

Beginners Forex Education Forex Basics

An In-Depth Guide to Forex Demo Accounts

A demo account is a type of trading account offered by Forex brokers. Demo accounts simulate trading in a live trading environment. The main difference between a live and demo account is the fact that traders are using fake, virtual funds to trade with on demo accounts, thus eliminating all risk to the client. In addition to serving their main purpose as a hands-on education tool, demo accounts also offer several other benefits:

  • Demo accounts allow traders to get more acquainted with a broker’s supported trading platform. Traders can learn to navigate, place and close trades, apply stops and limits, and view margin requirements. 
  • Demo accounts offer traders of different skill levels the ability to practice using different types of strategies and leverages with no financial risk.
  • Practicing on a demo account can give an entry-level trader a better idea of whether they are prepared to open a live account, or if they need more practice beforehand. 
  • If demo accounts mimic the broker’s live account types, traders can test out different accounts to find out which one is preferable. Spreads, commissions, and other broker-specific qualities can also be checked out. 
  • A demo account can be used to monitor and watch certain markets and spreads. 
  • Demo accounts can be used to test technical indicators and to utilize charts, while learning to look at chart patterns. 

While demo accounts are one of the best trading tools out there, traders should try to avoid falling victim to some of their downsides:

  • Many brokers start traders off with a million or so dollars in virtual funds, without any option to select a smaller starting deposit. Try to find a broker that offers more realistic demo deposits for a more realistic experience. 
  • Since traders know that they aren’t investing their hard-earned money, emotions won’t play a factor in the way that they would on a live account. When real money is on the line, fear, excitement, greed, and a whole host of other emotions will affect the way that trades are handled.  
  • Keep in mind that demo accounts will usually fill an order at the quoted price, with no slippage. Demo accounts can receive early fills when making bids or offers as well, which could give different results than what one would have received on a live account. 

Overtrading and more risky trading are also prime examples of how demo accounts might give one an unrealistic experience. Always remember that demo results can be a good indicator of one’s progress, but you’ll still want to exercise caution when switching over to a live account. 

Creating a Demo Account

You’ll want to choose a potential broker and check out their website to see if demo accounts are available. Most Forex brokers do offer demos, but there are some that don’t. Opening a demo is usually quick & easy – once you find a broker that offers them, you can sign up from their website with a few details, like your name, email address, and possibly your location.  Account details including a specific username and password are often emailed to clients but do make note of these details, as most brokers will advise you to create a new demo account if you lose your login details. From there, you’ll follow instructions to install the specified trading platform and you’ll be ready to start trading. 

The Bottom Line

Demo accounts are undoubtedly one of the best tools for Forex traders, serving as a hands-on trading environment simulator. Creating a demo account is usually very quick and easy, so there’s really no reason not to take advantage of the opportunity if you could use some practice. Although these accounts offer some realistic practice opportunities, traders should always remember that there are some differences between demo and live accounts, especially when emotion is playing a role. Once you’re ready to switch over to a live account, don’t make the mistake of feeling overly-confident because of good demo results – be safe and take it slow before taking larger risks.  

Forex Basics

How to Make Real Money with a Forex Demo Account

A demo account serves as a simulation account that traders can use to practice trading in a live environment with virtual currency. Opening a demo account is completely free and you never have to invest a dime into the account, regardless of how many you open, what company you use, or how long you use it. These accounts are one of the best ways for traders to test their practical skills with zero financial risks. Since demo accounts are completely free, many traders would assume that there is no possible way to make money from them. The good news is that it is entirely possible to profit from trading on a demo account.

So, how can you make money off a demo account? Participating in a demo account contest. You might not have heard of this before because many brokerages don’t offer this. Those that cannot afford to offer bonuses and promotional opportunities often stay away from this type of contest because it doesn’t bring them any income and only takes money out of their pocket. However, it is possible to find several of these contests online through different companies. Do note that many of these brokerages require you to register a live account to take part in their contests. 

Each participating brokerage offers its own unique contest with different rules and prizes, but many of these contests follow the same pattern. Anyone that would like to can open a demo account through the broker and trade for a specified amount of time, usually around a month or so. When the time is up, the trader that made the most profit is usually crowned the winner and given the main cash prize. Sometimes second, third, and other placing traders will earn lesser prizes. 

If you are looking for an ongoing contest, you can search for “forex demo contest” on any search engine to find results. Some companies offer contests periodically while others offer them monthly. There are also cases where a demo contest is offered as a one-time promotion. It’s a good idea to check online for any updates periodically so that you don’t miss out on a good opportunity. You’ll want to participate as soon as the contest starts so that you don’t get behind. 

Before you register for any demo contest, it is important to understand the unique rules that apply. You need to make sure that you qualify to enter so that there are no issues claiming your prize if you win. It is also important to look at the prize(s) and to make sure that any cash prize is fully withdrawable, so you don’t waste your time. If there are requirements for a certain trading volume to be met or other rules before the prize can be withdrawn, make sure that you’ll be able to meet those guidelines. You have a better chance to win a prize if you can find a contest that rewards 2nd and 3rd place winners. 

To give our readers a better idea of their options, we’ve provided a few examples of current demo contests that are currently available as of the summer of 2020. Keep in mind that these contests may expire or change over time, but this should give you a general idea of what’s out there. 

  • HotForex holds monthly demo contests that reward 1st place with $2,000, 2nd place with $1,000, and 3rd place with $500. Traders can view the current rankings online but be aware that all rewards are credited on a live account.
  • Atirox offers a monthly demo contest named Chasing Mavericks. The goal is to maximize prosses while incurring as few losses as possible. The monthly reward is $5,000 for the winner, but you need to register a real account with the company to participate. 
  • OctaFX holds periodic demo contests with the next one taking place on June 8th. The 1st place prize is $1,000, 2nd place wins $600, 3rd place receives $200, and 4th and 5th place takes home $120 and $80. The participant with the highest balance at the end of the round wins. You do have to register a live account to participate. 

These are only a few examples of demo contests that are out there, so be sure to look at other options. If you decide to open a trading account through a company for one of these contests, you’ll need to make sure that they offer attractive trading conditions on their live accounts. Also, know that it isn’t easy to win these contests. Most of them look for the highest profit or the most growth, so beginners will have a hard time winning. Still, this doesn’t mean that you shouldn’t participate, since these contests will help improve your skills and you could still win a prize with hard work and determination. 

Beginners Forex Education Forex Trading Platforms

Reasons to Take Demo Trading Very Seriously

It is incredibly important that you use a demo account, you have probably been told this a number of different times, and it is true, a demo account is vital for becoming successful. Spending a lot of time on a demo account is not something that you should be ashamed of and not something that you should shy away from, it is a fantastic learning resource and a place for you to test out new ideas without any real risk.

One of the main benefits to a demo account is that there is no risk to you, unfortunately, this also means that there is no direct reward, you do not get anything monetarily out of trading on the demo account, so after an extended period of time, it can become boring and so the motivation to continue using it in a way that you would potentially use a live account will begin to dwindle.

This is the time when a lot of people will decide to jump into a live account, simply because they are a little bit boring to use the demo account. Jumping into a live account at this stage, with this mentality will only lead to a blown live account. It is perfectly normal to start to feel bored or to lose that enthusiasm when there is no direct reward from what you are doing, this is where you need to be able to teach yourself and to push yourself to be able to be successful in the demo account and to get the most out of it before moving over to a live account.

So let’s take a look at some things you can do to help you take the demo account a little more seriously.

Creating a Loss or Forfeit

One of the main problems behind a demo account is that when you lose or make a mistake, there is no actual punishment, you will just shrug it off and move on. This is of course completely the opposite of a live account, where a loss, no matter how small can hit you quite hard. It can be hard to take a loss on a demo account seriously due to that very reason. Over a longer period of time, this will ultimately make demo trading a little boring as there is no risk or reward to it, so there needs to be a way to counter this.

One way of countering this lack of loss is to create a real-world penalty that you need to do each time that you make a mistake or that you make a loss. This can be something simple or you can make it a little more realistic. To make things simple, every time you make a mistake or a loss, force yourself to do some pushups or some jumping jacks, this will make you want to work hard to avoid having to do the exercise. If this isn’t for you, you can make it a little more realistic, every time you make an error or a loss, put some money away into a savings account, you aren’t losing the money, but you no longer have direct access to it. You are learning the same ideas of losing access to money with a loss, but luckily aren’t actually losing any real money.

Give Yourself a Mark

One thing that makes trading a little different to a lot of other professions is that when you learn it yourself, there is no grading system, there are no final exams to make sure understand what it is that you have learned or what you are doing, this can make things a lot more accessible, but it also means that there are no knowledge checks along the way, there is no way for you to know how much of what you have learned you have actually taken in and understood. It is important to have an understanding of what you are doing well and not before moving on to a live account, so you do not make the same mistakes on a live account.

Due to this, it is important that you are able to rate yourself, of course, if you just give yourself a rating out of 10 then you will most likely go a bit higher than you probably should, that is the natural thing to do. So, instead, you need to be able to grade yourself on a number of different things, so here are a few things that you could potentially look at after each week or months to gauge how well you are doing.

  • Do you follow your entry rules?
  • Do you follow your exit rules?
  • Do you stick to your risk management plan?
  • How many trades did you take or miss?
  • What is your profitability?

Grading yourself on these basic yet important aspects of your strategy will help keep you on track and will also help to show you exactly where you may be falling short., Work on anything that isn’t getting a 10, of course, you will never get a 10 in everything, so there will always be things for you to work on and improve. Until you are at a high rating for all sections, you should be remaining on a demo account.

Setting Targets

This can go along with the grading system that you created above, except this time we are not looking at just grading, instead we are looking at setting specific targets, and then potentially rewarding ourselves for the work we have done. So let’s imagine that we want to set a target, we want to have a 50% win rate at the end of the month, or we want a 5% balance increase at the end of the month. They are specific goals that we are able to achieve.

One way to make it a little more interesting is to allow yourself to give yourself a little reward should you decide to reach that target. It doesn’t have to be anything huge, it could just be a simple take away or a new pair of trainers. Setting this goal keeps you motivated to work hard on the demo account, but also rewards you for working hard.

Getting Feedback

Getting feedback on your demo account results and progress can give you a lot of validation around what it is that you are actually doing. Posting your results and account statistics on various trading forums will allow others to let you know how you are doing, this is a way of motivating yourself with the positive comments, or where people have offered some constructive criticisms, it is a way to improve the way that you trade.

Feedback can be powerful and it is a fantastic way to keep improving the way that you trade, but also gives you an insight into what others are doing, the demo account is the perfect place for you to try out any of the possible changes that the feedback has offered.

So those are a few different ways that can help you to keep taking a demo account seriously. Demo accounts are so important, they are a risk-free way to improve and learn, but that risk-free aspect also comes with no rewards, so it is important to find ways to help keep yourself motivated at using a demo account to keep it relevant and to help prevent you from jumping over to a live account too quickly.

Forex Course

22. Perks Of Trading The Forex Market


The foreign exchange market is, no doubt, the most popular market in the world. Though it is considered to be a very risky business, it can prove to be the best platform for trading and investing if things are done wisely. People often are in a dilemma to choose between the stock market, commodity market, and the forex market. Hence, it is important to know the benefits each market has to offer. So, in this lesson, we shall discuss some significant benefits the forex market has to offer.

Advantages of Trading Forex

Open 24/5

The forex market is traded throughout the day from Monday to Friday. And this got to be the biggest advantage for the part-time traders. Since there are quite a large number of people who are into 9-5 jobs, the forex market is an excellent option as one can trade anytime during the day. Hence, the forex market is the most flexible market when it comes to timings.

Great Liquidity

The forex market is the largest market in the world. It has a huge volume of orders coming in every single second. With high liquidity, trades are executed as soon as the order is placed. In fact, the forex market has the highest liquidity compared to any other market.

Margin Trading

In forex, the retail traders get the facility to trade with leverage. That is, with leverage trading, a trader can trade with quantities even if they do not possess the required amount. This is a great advantage as it paves the way for the small traders who are willing to participate in the market.

Nominal Commission and Transaction Costs

Another significant benefit to consider about the forex market is that the forex brokers don’t really charge any high fee, such as brokerage fees, exchange fees, or clearing fees. Having said that, they do charge commission, which is in the form of spreads. The bid/ask price, which is often referred to as the transaction cost, is typically around 1% when the market conditions are normal.

The Freedom on Lot Sizes

In forex, the brokers allow trading with as low as 0.001 lots. And traders can choose from 0.01 lots, 0.1 lots and 1 lot. Hence, there are variable lot sizes in this market. But, if you were to consider the futures market, the lot sizes are of one type and are determined by the exchanges.

Free Demo Trading

Demo trading is one of the best features the forex brokers have to offer. And the cherry to the cake is that demo trading accounts are free of cost. Demo trading can be very helpful to both novice and professional traders. Novice traders can use it to get the hang of placing orders and other features in the platform, while professional traders can use them to test the consistency of their strategies. Hence, we can consider demo trading to be a powerful risk-reducing tool.

Facility to Go long and Go Short

In the forex market, there is no directional bias. This is because currencies are traded in pairs. If a trader thinks the base currency would rise in value, they can go long, and if they think it will depreciate in value, they can go short. So, unlike the stock market, a trader need not borrow shares to sell short an instrument. Hence, traders can profit from both rising markets as well as falling markets without any complications.

Hence, these were some of the most significant features and advantages of the forex market. In the coming lesson, let us put up a comparison between different markets and see which market proves to be the best; for now, take the below quiz and see if you have understood this lesson correctly.

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