For the reason that forex (FX) is deemed as a decentralized market wherein the dealers propagate their own price feeds via proprietary trading instruments, it is very important to understand the idiosyncrasies and features of every type of trading solutions and software that you come across with before you commit real funds within a trading account.
Providentially, in retail, the forex traders may evaluate and test every platform using forex demo dollars. The free forex demo account will allow you to download the software without cost. This is beneficial so you will be acquainted with the layout of the trading platform as well as the order of entry. This article will confer the significance of demo trading and inform you on what you must look out for when opting for different platforms to become a successful forex trader.
Understanding Basic and Integrated Platforms
You should understand that some trading platforms incorporate almost everything from news to charting, while other accounts furnish plain layouts that only work on order entry, price quotes, and reporting.
As a novice trader, it’s critical to always make use of dealer demos prior to trading live since it’s the only method to familiarize yourself with the various platforms and their features. For instance, there are platforms that utilize pop-up tickets, while there are others that spot the order location from the chart. Usually, to purchase a currency pair, you just need to easily click on the offer portion of the quote, known as the “ask”, and to sell, you just have to click on the bid segment. You will come across with some platforms that will permit you to select limit or market orders once the quote window appears, while there are programs that will demand you to create your selection in advance.
To learn currency trading sufficiently, you must place not less than 20 demo trades on each of your forex trading demo platform prior to using your money for actual trading. This will allow you to be conversant on the specifics of order entry on every platform. As a trader, you must not trade live unless you can assertively and aggressively answer the following questions:
- How do I put a limit order?
- How do I establish a stop?
- Can I place a limit and a stop during the time of entry?
- Are the platform’s spreads variable or fixed?
- What is the size of the lot that I am allowed to trade (based on units – 1,000, 10,000, 100,000)
- Can I combine the lot sizes?
- Can I contact the dealing room openly when my internet connection is down?
A particular function that many new forex traders like you continuously fail to fulfill is tax reporting. Since FX is an unregulated, global market, as a general rule, dealers do not furnish any documentation to the tax authorities in the country of residence of the trader. Keep in mind that tax reporting is your sole responsibility. Dealers just produce detailed transaction records – via an electronic format – wherein traders are required to compile their personal tax reports. This arrangement evidently necessitates a trading platform with flexible and organized reporting functions.
Note though that the reporting criterion diverges from one dealer to another. Almost all dealers will give you a complete transaction report, but how such transactions are designed and implemented could mean the disparity between spending hundreds of hours on reconciliation and allocating a little time to print out your final report to show to your accountant.
There are FX traders who carry out as much as 1,000 trades each year. A trading platform that merges all those trades into a simple, end-of-year income statement, which breaks down all the expenses and profits, will be very useful in the future. Tax reporting, though rarely the greatest part of forex investing, is an essential part of your personal record keeping as a trader and can have a profound impact on your trading career.
Forex Trading Strategies
The best forex demo account will provide you forex training that allows you to experiment numerous trade styles and sizes and find out your trading personality. Through a forex demo account you will determine if you are a short-term momentum trader or not.