Demo Forex Trading Accounts: What You Need to Know

Demo accounts are what they sound like. They are real accounts where you don’t trade real currency pairs. Instead, demo accounts can be used for practice. They are great for beginners that have yet to gain forex trading experience.

It can help you get familiar with the different forex markets. You can also use it to perfect your strategies and test tips and tricks. The best part of demo accounts is that the market conditions are based on real-life data.

So, your ‘demo’ trade will be a very close representation of trades if you make actual trades with real money. Demo accounts are primarily free. Once you have more confidence, you can start trading live accounts. Live accounts are ones you use to trade real currency pairs in forex with real money.

Forex Trading Terms You Need to Know

You’ve seen us mention terms like currency pairs, CFDs, and more. These are standard forex trading terms.

If you’re new to forex trading, you should take some time to get familiar with these terms. It’ll help you understand everything works much better. Here are some standard forex terms you must know.

Currency Pair

These are the most important forex terms. Because forex trading is simply trading currency pairs, you’ll have a base currency and a quote currency. In which you’ll either go long or short. If you go long on the base currency, you’ll naturally go short on the quote currency.

For example, if you’re trading USD/EUR pairs, USD is the base currency, and EUR is the quote currency. Think of it like EUR vs. USD.

Position

Forex trading is making speculations on particular currency pairs. To be more specific, you’re speculating on the exchange rate movements. The position is the amount of currency that gives the trader exposure to a particular pair’s exchange rate.

Long and Short Position

A common term that’s used alongside position is long and short. A trader takes a long position when they think the currency pair’s exchange rate will increase. In contrast, a short position is when a trader believes the exchange rate will decrease.

CFD

CFD stands for Contract for Differences. Unfortunately, you can’t trade forex CFDs in the U.S. However, it’s legal in other countries. You don’t own the underlying asset.

Leverage and Margin

Leverages are one the most important things to understand. It could be the reason you earn significant returns or suffer tremendous loss. Leverage means the size of a trading position you can control.

You control with a given margin, and this margin is the amount your broker holds as collateral. You’ll have to pay this collateral if you make a loss. Leverages can vary depending on the broker to broker.

Order

An order is mainly for your broker. It tells your broker when to execute a transaction. When you tell your broker to buy $50,000 against EUR, you’re giving an ‘order’ to your broker to make that transaction for you.

Derivatives

These are financial tools whose value comes from other assets. Forex derivatives are popular.

PIP

A percentage point is a minimal change in the exchange rate. The size can differ, but it’s usually 0.0001.

Easy and Effective Forex Trading Strategies

As a beginner, your best bet is to start with a demo account first. It will help you get more confidence and can try out your strategies.

There are many proven strategies out there. But not all of them will work for everyone. The more experience you gain, the more techniques you’ll be comfortable with. However, here are three simple strategies to start with.

1. Inside Bar

In this strategy, traders use the pending order to trade a breakout. The direction of the breakout should be in the direction of the trend. Thus, it’s best to use this strategy as a continuation pattern.

The price action dominated by a seller will be weaker. To implement this strategy, you’ll place a stop order to trade a breakout. Then you’ll cancel the order once the order is triggered. Remember to place only one order.

2. Trend Trading

Beginners should look for reliable strategies – Trend trading is one of the most reliable strategies. However, you must have an eye for detail and look for possible trade opportunities in a chosen price trend in trend trading.

Any trend won’t be enough. For this strategy to be reliable, you’ll need a stable trend. You can figure out reliable trends by looking at the strengths, weaknesses, and overall trend direction.

Trend trading is flexible since it can work for short and long-term trading. That said, it’s more suitable for long-term trading.

3. Pin Bar Trading

Another effective, easy trading strategy is pin bar trading. Using this strategy, traders can check for price momentum. It’s an easy strategy to follow since it’s obvious to chart. Traders can use technical analysis to help perfect the pin bar trading.

5 Tips for Forex Trading

You’ll need some tips to go along with the strategies. Using both will help you make the most out of the trades.
Again, with more experience and confidence, you’ll be able to identify patterns and strategies yourself. But these tips will help you become a well-rounded trader.

1. Know Your Trading Style

Before you start trading, you need to be realistic and set goals. That’ll keep you grounded. Goals also give you a framework on which to base your trading strategies. You can check whether your trades will take you where you want to go.

In addition, you should know your trading style. If you’re risk averse, your strategies should be able to adapt to that.

2. Keep Learning

You might get lucky on your first trades and get some significant returns. But remember to keep learning about the market. Knowledge is potent in forex trading. Therefore, you should always focus on educating yourself.

3. Stick To a Plan

While there isn’t a single right way to trade forex, sticking to a plan is better. Your plan is a fundamental part of your trading career. Therefore, to become a successful forex trader, you’ll need to be able to stick to a plan.

Ideally, it should outline everything you want to achieve from forex trading. It should also tell you your risk tolerance and evaluation criteria. The hard part is sticking to a plan. Trading has some inherent risks. When you face some losses, it can be easy to blame the plan and try to veer off the tested path.

But if you have a plan that works, stick to it. There’ll be a couple of losses, regardless. But don’t let the irrational side take over. Sticking to the plan and trusting the process is crucial.

4. Be Consistent

Consistency is key. Even if you have some losses, stay consistent. It compounds over time. You’ll be surprised how consistent practice improves your forex trading skills.

Remember that a strategy is only effective if you are consistent about it. Therefore, you might not make the most out of a strategy if you don’t stick with it long enough.

5. Realize Your Limits

One huge mistake many beginners make is that they don’t know their limits. Beginners quickly produce bad trades and let emotion take over. Forex isn’t a get-rich-quick shortcut.

You can earn significant profits in forex trading. It’s called the most liquid trading for a reason. But also, be reasonable. Never trade forex with the money you’ll need for day-to-day living expenses. If you’ve suffered a loss, take some time to rethink and reevaluate.

Wrapping Up

Hopefully, these tips and easy forex strategies will help you get the most out of your trading journey. It’s possible for beginner traders to learn forex trading. The question isn’t always about how to start with forex – that’s the easy part.

Instead, being consistent, learning new strategies, and improving as a trader are all more important. The more practice you have, the better you’ll get.

About the author – T.R. Carnegie

I am a retired investment banker who has invested heavily in energy stocks since 2005. My goal is to help people understand what is really going on behind the scenes and to provide them with the information they need to take control of their financial future. These days, I am an energy stock investor who has made money from oil, natural gas, coal, nuclear power, wind, solar, biofuels, storage, and battery technologies. In this blog, you’ll find ideas about investing in companies that will help us reduce our dependence on fossil fuels, increase access to clean energy, improve efficiency in manufacturing processes, and build products that save people money and protect the environment.