This article shows how you should use an Australian forex brokers demo account and the factors you should consider.
If you wish to enter the forex trading world, you should commence trading with a demo account. Most Australian forex brokers off this facility to their clients. It will allow you the opportunity to get to know how the market works and what is required of you. You will be able to test your strategies and trading plans and determine if they are suitable for profitable trades. You have to implement a suitable risk management plan to ensure that you cover all the possible loopholes in your trades and to protect you from losses.
Imagine It Is Real
In a practice account, you use virtual currency to make your trades. So if you lose all the currency you have, you will not be losing any real money. Although you are using virtual currency, you should not think of it as a game. You should treat your demo account as you would a real live trading account. That is the only way in which you will be able to experience the real emotions of trading. Once your trades are making consistent profits in the demo account and you are happy with your strategies, you can move on to a live account. Whilst you are trading in a demo account, you should pretend that you are dealing with real funds.
Lower the Leverage
Most demo account come with fairly high leverage. You should request a reduction in this amount. If you implement a suitable risk management plan, you will normally be allowed to use maximum leverage of 20:1. You should request that your broker limits you to this ratio. This will provide you with the opportunity to become accustomed to lower leverage levels which will be beneficial when you start trading in the live market.
Australian Forex Brokers Trading Balance
Demo accounts are normally allocated a certain trading balance amount. These amounts are generally quite high and this is completely unrealistic as most novice traders will not commence trading with high initial investment amounts. You should request that your forex broker reduces the amount to a more realistic one. Ask for an account balance similar to what you envisage depositing into your live account. This will ensure that you are simulating real conditions of trade, with leverage and fees at a similar level to what you intend using when trading live.
The currency pairs you use whilst trading in a demo account should be limited. If you are a novice in this financial market, you should consider trading a major currency pair, such as EUR/USD. The temptation to trade with a range of currency pairs may be great as you are trading with virtual currency. However, once you start trading live, you will not be able to cope with trading several currency pairs until you have gained sufficient experience in the trading market. By limiting your currency pairs, you will be reducing your risk levels. The limitation of the currency pairs you use in your demo account will allow you to gain knowledge about the pairs which will aid you when you enter the live trading market.