HotForex demo account guide for new traders
- HotForex demo account guide for new traders
- Benefits of the HotForex demo account
- Downsides to using a Demo Account?
One of the things you first get to use as a new forex trader is a demo account. It is one of the things that a forex broker must provide its traders. HotForex as a credible global broker offers its traders a quality demo trading experience. In this article, we will give you detailed information about this practice account and how to use it.
Benefits of the HotForex demo account
There is more to a demo account than you probably think. The demo account offers traders a lot of benefits some of which are listed below:
(Risk warning: Your capital can be at risk)
1. To test out your trading skills
When traders just start to learn the art of trading, they tend to make a lot of mistakes. Some of these mistakes might revolve around basic and simple things. However, as simple as they may seem, they may be quite costly. They may cost the trader to lose significant amounts of capital – some traders even lose all of their funds.
If, however, these mistakes were made on a demo account, there will be no risk of loss of any hard-earned capital. So, the demo account gives traders the opportunity to test out their trading skills without incurring any risks whatsoever. Knowing full well that there is no risk involved, traders can then practice freely. Practice boosts perfection – this very much applies to trading as well.
2. To test out a broker
In trading, you are putting your capital on the line. To make trades, however, you need to do so through a platform provided by a CFD broker like HotForex. Since it is your hard-earned capital that is involved, you want to be sure that the broker you are committing your funds to, is worth it.
As you may already be aware, not all forex brokers out there are credible or worth doing trading with. Some brokers provide traders with poor trading software that can run into glitches frequently in the middle of trades. This has the potential to result in a significant loss of capital. Furthermore, there are brokers as well who are known for charging high and exorbitant spreads and other fees and commissions for trades made by traders.
All of the above are things you don’t want to see in any broker that you go for. But you really do not get to know all of these facts before you sign up with the broker. The demo account, however, provides the opportunity to know all these facts about an online broker before you open a live account and deposit real funds.
But, you have to note that one broker that you can really trust is HotForex. To confirm this, you can check out the HotForex demo account to confirm.
3. To test trading strategies
A trading strategy is a plan that guides a trader as to going about trading. The trading strategy functions like a comprehensive guide that instructs the trader on what to do as far as the entire trading process is concerned. A good trading strategy will cover which markets the trader trades; the time at which he trades; the criteria he looks out for before entering a trade and so many other factors.
The importance of a trading strategy cannot be overemphasized. A trader without a trading strategy is like one who embarks on a journey without any plan as to where he is going. Thus, as a trader, a trading strategy is a must. However, trading strategies are not always profitable. Thus, you have tested them before you apply them. There is no better place to do that than on the HotForex demo account. If you test them on the HotForex demo account, you will know if they are profitable or not before trying them on a live account.
Downsides to using a Demo Account?
The demo account holds many benefits for traders who use it. However, as we know, everything that has a good side will also have a negative flip side. Hence, making use of the demo account also can have some adverse effects on your trading.
(Risk warning: Your capital can be at risk)
1. Does not help trader emotion
To succeed at trading, there are many boxes that you have to tick. That is, there are some things that you have to learn and imbibe. First, you must become knowledgeable in the technical aspects of trading. That is, you must be able to properly conduct an analysis of the market to arrive at potential successful trades.
To do this, you have to know how to read the charts and make use of indicators to forecast potential price movements. This is known as technical analysis. On the other hand, you should be able to study the financial news to decide in what direction it may influence the markets. This is technically referred to as fundamental analysis.
Usually, you have to be able to balance both technical analyses on one hand and fundamental analyses on the other, to be able to arrive at quality trading decisions. Mostly, a potentially profitable trade is one in which both the technical analysis and fundamental analysis properly align in the same direction.
But oftentimes, despite all of this knowledge, many traders are still not profitable. This is due to several reasons, besides technical knowledge – or the lack of it. One of such factors is the psychology of the trader. Trader emotion is one of the biggest factors that cause traders to either lose money in the markets or bag profits. Trader emotions that affect trading include greed, hope, and fear.
The problem is that trading with a demo account like the HotForex demo account for a long time makes you imbibe all the above emotions in the wrong way. For instance, greed. Because you are not trading with your own money, you can easily become greedy and leave your profitable trades to go on and on without closing them.
You do this in the hope that the trades will bring in even more profits. Usually, this is not the case as the market tends to reverse. So, you get to lose money that you had already gained in the market.
2. Does not really simulate real trading conditions
Ideally, the HotForex demo account simulates real life. That is, the market conditions you see when you are trading with the HotForex demo account are also exactly the same when you are trading with a real, live account. As a result, we often say that the HotForex demo account simulates or copies real-life trading conditions.
However, while this is true on the part of the market, it may not be true on the part of the trader. That is, when trading with the HotForex demo account, the trader does not trade as if he is trading a real account. Thus, he can imbibe some characteristics such as being nonchalant that may stay with him even when he opens the live account.
When trading with the HotForex demo account, anything goes. Your money is not on the line. Consequently, you are free to take any risks and enjoy the entire process. However, you cannot try the same with a live account. Thus, we can say that the HotForex demo account is not entirely representative of real-life trading conditions.
3. The demo account can teach negative habits
Similar to the above, another of the downsides of demo trading is that traders tend to pick up negative and harmful habits that may follow them into their live account trading. If they apply these habits to live to trade, they may be setting themselves up for some huge losses.
For instance, most demo accounts come pre-loaded with large sums of money. Usually, the money ranges between $3,000 and $100,000. The HotForex demo account in particular comes with $100,000. When traders trade this amount in the demo, they tend to take big risks such as using big lot sizes. When they do this for long and later transition to living to trade, they may have imbibed this as a habit and start to use such large lots on their real accounts. Doing this can hurt their accounts badly.
Having known some of these downsides to the HotForex demo account, should you decide not to trade with them? No. The HotForex demo account is one of the best innovations to happen to forex trading and you should, under every circumstance, make use of them. You should, however, take note not to imbibe some dangerous attributes that may influence your live trading.
Conclusion on the HotForex demo account:
HotForex provides traders with a “practice” account that comes with $100,000 pre-loaded funds. We have to note that this is one of the largest demo accounts you can get from brokers in the forex space. As you will agree, this account is somewhat unlimited. Even more commendable is the fact that the account is available on the MT4 as well as the MT5, the new industry standard. It is also available for both new and old traders.
The demo account is one of the most indispensable tools you need for your trading career. But we highly recommend that you get your demo trading service from a good and trusted broker. HotForex Demo is one of the best demo accounts you can get because it comes with premium tools that you may not be able to get elsewhere.
(Risk warning: Your capital can be at risk)
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Last Updated on March 30, 2022 by Andre Witzel