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Why Every Forex Beginner Should Start With A Demo Account

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The foreign exchange market is often touted as the solution to all your problems. It’s a get-rich-quick scheme that works. You need no prior experience or education. You can do it from the comfort of your home. It’s as easy as gambling.

But here’s the thing. Forex should never be acquainted with gambling. Successful Forex traders are not just going by instinct or trying their luck. Yes, you can start as an amateur and succeed. But if you don’t put in the time, you're as likely to fail. The solution for many beginners is to start with a Forex demo account, which will help them learn how to use MetaTrader 4, and how the markets work.

The dangers of Forex trading

Proponents of Forex trading are not lying. You can get rich and quit your dayjob, becoming a professional trader. You can technically rack up money faster than you ever could at a roulette or backgammon table.

But just as you can make a lot of money, you can lose everything incredibly quickly.

You see, Forex trading works with something called leverage. Forex brokers generally offer the chance to make up to 200 times more than the profits on what you put down. This is because most currencies move very slightly on a day-to-day basis. If you were to just make a 1:1 trade, you'd be making mere dollars and cents.

With leverage, however, the odds go both ways. Just as you can make far more than what you risk, you can also lose far more than what you risk. Instead of losing your capital, you can end up in debt.

Getting a Forex education

So, while it’s not strictly necessary, getting a Forex education before you start risking actual money is highly advised. And it’s not difficult. There are plenty of websites, including brokers, that offer Forex courses for free. Some of these are text-based, others have video lectures.

Unfortunately, getting an education is far from glamorous, and it’s not what most of us are signing up for. We want to make money, not go back to school! This is where the benefits of a demo account come in.

Open a Forex demo account

A Forex demo account does exactly what you would expect it to. It allows you to trade virtual money, so that you can see how your trades play out in the real Forex environment. It gives you the chance to mess up with no real consequences. And there is no substitute for learning from your mistakes.

Demo accounts are even useful for experts, who want to try new strategies without risking their winning positions.

Of course, demo accounts have their downsides. You can get overconfident when using virtual money, and bring that arrogance into real life trading.

But, if you're smart about it, and have no illusions that demo trading is anything more than a learning tool, it will give you the advantage you need.

Forex trading is an excellent way to start making extra money. However, it can also be incredibly risky. Opening a demo account with a Forex and CFD broker is a great way to learn from your mistakes without risking your livelihood.

Posted-In: Forex Markets

 

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