Start Currency Trading with a Practice Account
For currency trading newbies, the best way to get a handle on currency trading is to open a practice account at any of the online foreign exchange (forex) brokers. Most online forex brokers offer practice accounts that let you experience the real-life price action of the forex market. Practice accounts are funded with "virtual" money, so you're able to make trades with no real money at stake and gain experience in how margin trading works.
Practice accounts give you a great chance to experience the minute-to-minute price movements of the forex market. You'll be able to see how prices change at different times of the day, as well as how various currency pairs may differ from each other. Be sure to check out the action when major news and economic data is released so you can get a sense of how the forex market reacts to new information.
In addition to witnessing how the forex market really moves, you can
- Start trading in real market conditions without any fear of losing money.
- Experiment with different trading strategies to see how they work.
- Gain experience using different orders and managing open positions.
- Improve your understanding of how margin trading and leverage work.
- Start analyzing charts and following technical indicators.
Consider opening practice accounts with a few different forex brokers because each trading platform has varying capabilities and functionalities. In addition, different brokers have different trading policies, charting packages, and research offerings. Also, try to get a feel for the level of customer support you'll receive as a client.
Paper trading is writing down trades on paper based on real-time market prices, but not having any real money at risk. Practice accounts are a souped-up version of paper trading — you only have to click and deal, and the trading platform does all the recording for you.
Whether you're trading in an online forex practice account or paper trading on stock quotes from the morning newspaper, be sure to keep in mind that your results aren't real — you never had any real money at stake.
Think of it this way: If you make a handshake bet with a friend on a sports game, you're probably not going to be too concerned with whether you win or lose. But if you bet $100 on the game, you'll probably watch the whole game, cheering and yelling while you do. The difference: Emotions come alive when real money is on the line.
Practice accounts are a great way to experience the forex market up close and personal. They're also an excellent way to test-drive all the features and functionality of a broker's platform. However, the one thing you can't simulate is the emotion of trading with real money. To get the most out of your practice-account experience, treat your practice account as if it were real money as much as you can.