Should you practice trading with a demo account? This is a common problem for many traders, especially for novice traders. The answer is unquestionable: yes. Before real account trading, it is necessary to do practice trading with a simulated account. The simulated trading can help you familiarize yourself with the market, understand the basic principles of market operation, and help you fully understand the transaction. However, although simulated account trading can indeed teach you a lot, you must remember that there is a big difference between real account trading and simulated account trading. Doing well in simulated trading and making money is not Represents profit in real account transactions.

Forex simulation trading

Many things we are engaged in in life are to do a lot of simulation exercises, and then practice them in real life. For example, in football games, players practice a lot on the court every day, and then they can play official games after they are mature. The same is true for pilots. First do simulated flight training before you can actually fly the plane. Lawyers’ debates are the same. When lawyers formally go to court to debate, they will definitely do a lot of mock jury debates. The same is true in trading. Before you start trading on a real account, you must take time to do simulated trading. Moreover, the market environment faced by the simulated exchange is real, but the funds in the account are virtual.

Register a demo account

Registering a demo account is very simple. Most online foreign exchange brokers provide simulated trading services. You only need to log in to the official websites of these brokers, find “Demo Trading” on the top, click into it, and then fill in some basic information. Then submit for registration.

After registration, the broker will send you the account password of the demo account in the form of an email. After getting the account password of the demo account, you can download trading platform software on your mobile phone or computer, such as MT4-this is currently the most widely used and most used foreign exchange, CFD and futures trading software. Currently MT4 is Transition to MT5. After downloading MT4, open the software, find the server of the corresponding broker, and enter the account password to enter the trading interface.

The simulated trading services provided by brokers are generally free. The reason for doing so is because brokers know very well that after a period of time, customers will have a strong motivation to do real trading. Brokers can take this opportunity to develop customers. When general traders do simulated trading, they will feel the excitement and huge profit temptation brought by the transaction. After a period of time, they will feel that the simulated trading is not addictive and boring, and they will want to try real trading. Brokers have long understood the psychology of their clients.

Compared with a real account, there is basically no difference between a demo account and a real account except that the funds are virtual. The initial deposit of a demo account is generally US$5,000 or US$10,000. Regardless of whether the demo account is profit or loss, the funds are virtual, just a number, so it will not cause you any financial burden.

When the funds in your demo account are running out, you can reopen a new demo account without any impact. At the same time, the demo accounts provided by general brokers have no time limit, you can use it as long as you want.

Register a demo account

What is simulated trading?

The funds in the demo account transaction are all virtual and will not have any impact on your real financial situation. But at the same time, the market environment faced by the simulated exchange is exactly the same as the real market environment. In other words, simulated trading is to use “virtual funds” to do transactions in a real market environment.

Investment has risks. The financial market is a place where risks and returns coexist. Compared with other markets, the volatility of the foreign exchange market is relatively large. Coupled with the use of high leverage, the risks of foreign exchange transactions have become very huge. The advantage of simulated trading is that you don’t have to take your own real money to risk trading, as long as you can understand the basic principles and rules of the foreign exchange market and foreign exchange trading through simulated trading. Once you are familiar with the market, familiar with trading, and have your own set of effective trading strategies, you can then devote yourself to real trading.

Many traders start their trading careers with demo account trading. Many people don’t understand anything at first, don’t know what the foreign exchange market is, and don’t understand what foreign exchange trading is. Play with the mentality and do simulated trading. Through simulated trading, I began to become interested in foreign exchange trading, began to learn more about the foreign exchange market and foreign exchange trading, and learned a lot of things by myself. Finally, I gradually became familiar with the foreign exchange market and gradually learned many things related to foreign exchange. While increasing their understanding of foreign exchange, traders will also use simulated trading to practice their trading skills or optimize their trading strategies.

EA test in demo account

Open a demo account on MT4. MT4 contains a lot of historical data. You can use these historical data to test the EA system. The test results will be fed back to you. You can improve, adjust parameters, and optimize your trading system accordingly. As shown below. Although the test results can only reflect the performance of the EA in historical data, and cannot represent the performance in the future, at least the backtest of the EA has given traders a certain degree of confidence support. In addition, the longer the EA test, the more reliable it is.

Regarding the backtest, there are a few points worthy of your attention: First, you must set a certain time span to test the EA. This time span is up to you. When choosing the time span, you must consider various factors, such as a major occurrence on a certain day Events, such as Brexit, will cause huge fluctuations in the exchange rate, the market is in a disorderly environment, and the occurrence of such events is not regular and predictable. It is a market failure situation, so it is not appropriate to choose the test time Within the scope, small probability events in the market should be eliminated as much as possible to ensure that the market data is more representative. Second, the core principle of backtesting is to use past data to test the profitability of a trading strategy, and to predict future profitability based on this. However, the market is always moving forward. Therefore, the effective test in the past does not mean that it will be effective in the future. This is also the biggest drawback of backtesting.

In addition to back-testing, you can also use EA for real-time simulation trading, that is, place the EA in the existing market environment for trading, and after a period of testing, you can see the results. If necessary, make some adjustments to the relevant parameters to optimize your EA system. When testing the EA system with current data, be sure to pay attention to your account situation from time to time, otherwise, an unexpected event may cause your account to be liquidated.

Manual simulation trading

If you trade manually, an “account statement” will be automatically generated on the demo account, which records the trader’s transaction details in detail, and also includes some indicator analysis, such as winning rate, expected return ratio, profit and loss ratio, etc., as shown in the figure below . This information reflects your profitability, but also reflects some of your problems in the trading process. You have to find out your trading problems and correct them. If a lot of losses are caused by bad habits, you should change them in time. .

In addition, when doing manual simulation trading, you must not trade at will without a plan. Before trading, you must make a trading plan. There is a saying: plan your transaction and trade your plan. If you feel that simulated trading loses profits anyway, it is not real funds, it doesn’t matter, then you don’t have to do simulated trading, because simulated trading is to let you learn how to trade and improve your trading without the pressure of loss. Level, including mentality, analytical skills, and effective strategies. When you conduct simulated trading with a fearless attitude, you will never learn anything, and you will be out of the market if you trade with a real account. Therefore, to do simulated trading, we must take the attitude of real trading seriously, plan and discipline.