If you use your forex practice account in the correct manner, you can virtually guarantee that you will be successful with your trading, but the sad fact is that most forex traders or aspiring traders have absolutely no idea how to do this.
How most people start out trading is to open a forex practice account at a broker – most forex brokers these days have a demo account available. Then the aspiring trader starts to play around on the practice account – treating trading as a game. There is no set plan, and the trader will take trades left right and center at the slightest whim.
Usually there is no stop loss used, and usually the forex practice account contains about $50 000 – an amount of capital that most traders will not have in their real trading accounts. They will leave trades open that will run against them for huge amounts – not taking the loss, and stay in the trade to close it later for a small profit. With some trades they might get lucky, and get in just as the market is making a big move.
After a short while trading like this the trader decides that he or she are ready to trade live. After wiping out their account this trader then cannot understand what happened, and why they could not make money.
The problem is that they used their forex practice account completely in the wrong way, and in the process learned wrong habits that will be catastrophic in a real trading environment.
You should treat your forex practice account exactly in the same manner as you would your real trading account.
Here is the way how you should use your forex practice account in order to be successful in your trading:
- Firstly learn how your trading platform works – how to enter orders, how to add a stop, how to add a limit, how to close an open trade.
- The next step is to get your trading plan fully in place. This trading plan should include your position size, when and how you are going to enter the market, where you are going to place your stop loss and where you are going to take your profit. It should also include when you are going to trade and what you are going to trade.
- For example;
- 8h00 – 11h00 gmt
- 15 min chart. Angle & Separation between 20 and 50 EMA s
- Enter on pullback to 20 EMA when price closes behind the 8 EMA again in the direction of the trend
- Stop loss 5 pips in front of 50 EMA
- Take profit at 20 pips
- When 15 pips in profit move stop loss to break even.
- After 2 successful trades quit for the day
- After 1 losing trade quit for the day
- Position size – 1 standard lot.
- Only when you have a trading plan like this in place are you allowed to start trading on your forex practice account.
- Now you start to apply you trading plan exactly on each and every trade.
- When you have traded for a minimum of 4 weeks with each week being profitable, and you are profitable for 4 out of 5 trading days in a week, then you can consider starting to trade live.
If you follow this plan – then you are virtually guaranteed to be successful, and you start trading the right way right from the beginning.