The Right Way to Use Simulation Accounts

One of the most useful tools to prepare for forex trading is the demo or simulated
account. All firms provide these accounts. They enable a person to practice trading
without the risk of loss. The trades go through an identical platform that
would be used in real trades, but they do not execute. Instead, the profit and loss are
hypothetical but tracked in the account history. The demo accounts are viewed and used
by the forex firms as marketing tools for converting prospects into customer accounts.
They are not designed to train people on trading. The result is that many people have observed
the experience in going from simulated accounts, where they were making large
profits, to real accounts with sudden and large losses.
Their conclusion has been that simulated accounts are not a valid way to prepare
for trading. That is a wrong conclusion. While the real test of one’s capability is in trading
real dollars, testing one’s strategies and tactics through simulation can be very useful
if done under a plan of action that follows rules. The idea that one can start trading
forex effectively by simply opening an account and beginning to trade invites too
many pitfalls. Trading for the sake of trading is learning by trial and error. The risks
of major drawdowns are too great. Getting started in forex trading begins before one
trades. It begins with building fundamental and technical knowledge, testing skills without
risk, and then applying those skills in real accounts with varying amounts of risk and
capital.


By Abe Cofnas