What Is A Forex Demo Account?
Demo accounts are 100% free and are offered by all brokers. They are a good way for a beginner to trade forex with a real broker without risking any money. Demo accounts often have all the features you would expect from the broker. Plus it gives the trader a good feel for what trading would be like with MT4 or with the broker’s own software or apps.
What Is The Best Forex Demo Account?
Traders usually start a demo account with a thought that you may one day trade in a live environment. That said, you should compare a broker for a demo account the same way you would for a live trading account.
The list below includes information that would be important for you to trade on the markets with real money. To sign up for a demo account click on the “Open Demo” buttons below for a broker that suits you.
Forex Brokers – Demo Accounts
|Broker||Min. Deposit||Regulated by||Next Step|
|$ 5||FSCA Regulated.||Open Demo|
|ZAR 1000||FSCA Regulated.||Open Demo|
|$ 100||FSCA Regulated.||Open Demo|
|$ 50||CySEC Regulated.||Open Demo|
|$ 100||CySEC Regulated.||Open Demo|
|ZAR 1500||FSCA Regulated.||Open Demo|
How do Forex demo accounts work?
Most demo accounts work exactly like a regular account. Expect the broker will fund the account with play money credits. These credits are used for trading in an environment that mimics the live environment.
When you sign up for a demo account, verify your account by submitting the needed documentation. Your account will be available shortly, and you will receive your account logins
Some demo accounts expire after a period of time unless you open a regular account. When you open a live account, you will be able to keep your demo account. This is useful to continue testing new ideas and practicing while live trading.
Should I use a demo account?
There are significant risks in Forex (CFD) trading and much of the risk is hard to manage. If there is any concern for losing funds in trading, or if you feel that you can make smarter trades, these statements should be strong warnings. A very small percentage of traders consistently predict the market and fewer still make significant returns on Forex trading, so starting with a demo account that does not open you to risk is wise for first-time traders.
Prof Paul Barnes states in his 2018 paper titled Recent developments in investment fraud and scams (pdf source) “that it is not possible for investors to consistently ‘beat the market’ unless they have inside information and frequent trading will result in losses“. He goes on to say that “it also means that at any point in time no one knows which way a price will move next as they don’t know what the next piece of news affecting prices and supply and demand will be” (pdf – page 12).
The much-quoted work led by Professor Brad M. Barber from the University of Calfornia who has done extensive research on trader psychology and loss of funds. From the paper titled The Cross-Section of Speculator Skill: Evidence from Day Trading (2004 rev. 2013 – source) he states that “in the average year, about 450,000 individuals engage in day trading. While about 20% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders are able to outperform consistently .. [sic] .. to predictably and reliably earn positive abnormal returns net of fees.”
Due to the profitability that comes from being a broker and handling CFD and Forex trades, there has been a great number of new brokerages opening on the market between 2011 and 2015. The FCA, the UK regulatory agency, was concerned about the popularity increase in these complex products that were not understood, and following research, they issued a warning saying “the FCA’s analysis of a representative sample of client accounts for CFD firms found that 82% of clients lost money on these products” (source – FCA – 2016).
If you consider that you may be one of 82% of traders who lose money on these trading products, you should open a demo account first and do the risk management that is available to you before you think of investing money you can not afford to lose.
How to use Forex demo accounts.
A Forex demo account is a great way to make your first entry into forex trading. If used for too long it can breed bad habits and allow you to develop shortcuts that can impact your trading in a real environment.
I would always suggest that you use your demo account as you would your regular account. It is a great place to learn how to use MT4, how to open a trade, learn how to read the different charts, do technical analysis and try new strategies. If you are looking for an MT4 broker, we have put together our favorites here.
How long do Forex Demo Accounts Stay Open?
Demo accounts are open for different lengths of time depending on the broker and vary in length from 7 days to Unlimited. Below are the lengths of time the demo accounts we have listed above are kept open.
Are Forex demo accounts accurate?
Demo accounts use the same real-time data that you would be trading with. The only way that it is not accurate, is the wins and losses of your trades are not real. You are not making money as it is all play money.
The feeling of trading in a live environment will be different because of the psychological nature of the fear of loss. So, traders, you can expect that a move over to the live environment will feel different. Even though the platform is the same.
If you are new to trading and don’t know how forex trading works, it is wise to start your reading here. There is a significant risk associated with trading CFDs and thus a good way to start your trading career and keep it active to perfect new trading strategies is with a demo account.