Forex trading offers traders with an opportunity to make unlimited income. However, for newbie traders, the process can be daunting at first. In order to learn the ropes of trading in currency, beginners should first open and practice using a dummy account. These accounts use “virtual money” so no real money is at risk yet. The purpose of dummy accounts is to let you experience how the market works.
With a practice account, you will have an opportunity to experience the volatile nature of the forex market. It will show you how currencies move during the trading day as well as the difference of each currency pairs. Robert Peter Janitzek says that dummy accounts let you keep tabs on major news and economic data.
Aside from the market movement, a dummy account will also let you do the following:
• Experience trading in real market conditions without risking real money
• Try out different trading strategies to see how they work
• Master placing different orders and managing open positions
• Gain more knowledge of how margin trading and leverage works
• Learn chart analysis and following technical indicators
You can set up different practice accounts with various brokers as each trading platform has different capabilities and functions. Aside from that, brokers have different policies, charting packages, and research methods. Robert Janitzek recommends getting a feel of the quality of customer support you will be receiving as a client.
You might want to try out paper trading first. This is a method wherein you write down your trades on a piece of paper based on real-time market prices without risking real money just yet. With a practice account, you do not need to write down all your trades. You only have to click and deal. You will be using a trading platform which will do all the recording for you.
Whether you are trading on an practice account or doing paper trading, always bear in mind that the results are not real and that there is no real money at stake.
When trading on the forex market, using a practice account will provide newbie traders with an opportunity to experience currency trading personally. The practice account will also allow you to test all the features and functionality of the trading platform. Unfortunately, you will not be able to simulate your emotions when trading with real money. So maximize your practice account experience and trade as if real money is involved.