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Why practice is better than knowledge in Forex Trading?

Forex trading is a vast and complex world with an extremely dynamic market and hundreds of thousands of market participants. It is so easy to get lost within the realm of currency pairs as a beginner even if you dedicate hours of reading Forex books and watching video tutorials on trading platforms, strategies, software, etc. With thousands of different indicators, dozens of essential charting mechanisms, complicated platform choices, hundreds of brokerage companies, and many other aspects one can simply never read enough guides on how to trade Forex as a beginner. 

In general, practice is always a better teacher than theory no matter the subject or industry. But it is a bigger truth in the case of Forex trading. But how do you make it so that your practice lessons in Forex trading do not result in significant financial losses? What are the ways to acquire trading practice with fewer risks and less effort? We will address these questions in the article below. 

How can you practice Forex trading as a beginner?

There are some essential things that you should know in theory even if you choose to learn trading Forex in practice. Certain guidelines for Forex trading will help you learn the main market participants in the industry, a bit more about trading assets, terminology and glossary, regulatory framework, etc. They will guide you towards choosing the right brokerage company and finding a way to start trading Forex in practice as a complete novice. 

After you get introduced to the basics of Forex in theory, you can move on to practicing. There are few methods for how to practice Forex trading:

  • Registering on a demo trading account
  • Opening a real trading account with no deposit bonus

Demo Account

First option is the most optimal choice for beginners or those traders who wish to change the platform, software, trading account type or trading strategy. The benefits of live trading demo accounts are numerous, but the most important thing is that these accounts let you test out your skills, strategies and style on a real market without any financial risks. 

On a demo account, the platform credits your trading balance with virtual money usually from 100 000 US dollars to 1 000 000 US dollars depending on the broker. You can use the funds to place trades with any financial instrument that the broker/platform supports.

The demo account is completely free to set up but frequently comes with a time limit. Most brokers will allow you to trade on a demo account for up to 3 months, however, some of the top Forex brokers online might offer unlimited live demo accounts for free. As soon as you notice that your trades are more or less successful on a demo account you can switch to a real trading account. 

No Deposit Bonus

No deposit bonus is another option to test out your trading strategies, style and expertise without financial losses. No deposit bonus is a tiny amount of money that the broker will credit to your trading account balance which can be used for trading only and cannot be withdrawn.

The amount will vary from 5 US dollars to 50 US dollars in rare cases. Even though the bonus is non-withdrawable, the profits generated through trading with no deposit bonus can be cashed out at any given moment after satisfying the trading volume requirements. 

No deposit bonus is not available with all brokers and at all trading account types. Furthermore, such bonuses are prohibited in the EU region and cannot be claimed in every country worldwide. That is why, no deposit bonus is often an inferior method to demo account trading.

There are other types of bonuses, as well, such as deposit bonuses. Deposit bonuses serve as additional funds to whatever investment a trader makes initially with the broker. For instance, after making a first deposit in the amount of 100 US dollars, a 50% deposit bonus would get you a total of 150 US dollars available on balance. The deposit bonuses vary from 30% to 100% even but in much rarer cases. 

Where to get started?

First of all, you should choose a reliable Forex broker which is regulated and authorized by official market authorities, ideally in a region where you are residing. The regulations will ensure that your financial resources and personal data are safe with the broker. The regulated and licensed brokers will be obliged by the framework to keep your funds on a segregated account and to satisfy GDPR compliance, AML/KYC requirements and other rules. After you identify the broker with proper and valid regulations and licenses, you can research the account types, demo account conditions and available bonus programs (if any). 

If you have decided to go for a demo trading account check what is the time limit that the broker allows. Try to find a broker that offers a more than 3 months period of demo account activation and that offers “refill” of the bonus amount in case you run out of virtual funds. Then start planning your trading strategy, your financial instruments portfolio and the budget that you will be spending on each instrument/strategy.

Spend a few months trading on a demo or bonus account so that you test out your knowledge, understanding, trading style and resources in various market conditions. Afterward, you can switch to a real trading account and start trading with actual money.