Posted by Frederick Townes on March 7th, 2015 04:40 PM | Finance

Forex trading is one of the most rewarding forms of trading today. With returns of up to 100% in a few weeks, forex trading promises returns that are simply put, sound too good to be true. Yes, they are just that good. However, is forex trading for everybody? Can someone just dive into forex trading and start making insane profits? Well, no, and people must learn to walk before they can run. One of the services that allows traders to learn the basics of forex trading before jumping in themselves are demo accounts. What are demo accounts, you ask? Demo accounts are free practice accounts that let you learn how to trade on the forex market without standing to lose anything. Sounds like a gold mine, right? However, the demo accounts also have a fair share of haters themselves. Why? We will let you on that in this article itself.

What does the demo account do? It does exactly what it says, it is an account meant for people to practice and hone your skills, and it is a great way for newbies to start learning financial trading. The brokers who are doing this, do this for one reason only, and that is they want to increase their user base. They want to increase the number of people using their platform, and they do this by giving away free accounts in the hope that some of these people will actually get to like the whole forex trading thing and join them on their platform. Forex trading isnt something that promises a lot of money in exchange for a few clicks. There is a lot of strategy involved and some of them can only be learnt by doing it yourself this is where the demo accounts really show their use. You can trade all you want with virtual money unless you are confident enough that you can make a profit with real money .

However, since the money involved is virtual, the risk associated with losing it is zero, you literally have nothing to lose. However, the result is that when one practices with a demo account, he is less likely to be judicious and makes trades that would have been incredibly risky in real life. You wouldnt make those trades at all in real life, but just because the money doesnt exist, theres no loss even if you manage to blow it all on a trade. In fact, people keep taking these crazy risks and it dulls your sense of fear. Youll end up taking one uncalculated risk after the another and before you know it, this risk taking habit will be carried over to your real account, where you can blow your entire investment with just a couple of clicks.

The money to be made in the forex market is very big, but people also stand to lose a lot of money. That is why one needs to exercise restraint and self-control when making these trades and always be judicious when trading.