Like many professions where risk is encountered, taking forex trading seriously requires ongoing training. The airline pilot flies in simulation many hours before actually flying passengers. The simulation tests reactions to scenarios that enable practice of risk management. Similarly, a demo forex trading account can become a major tool for
improving your trading skills.
How to Use a Demo Account to Prepare You For Real Time
Like many professions where risk is encountered, taking forex trading seriously requires ongoing training. The airline pilot fl ies in simulation many hours before actually flying passengers. The simulation tests reactions to scenarios that enable practice of risk management. Similarly, a demo forex trading account can become a major tool for
improving your trading skills. Misused, it can be useless and actually counterproductive. Many people, after doing very well in a demo account, proceed to lose money in a real account. On the other hand, few people who lose money in a demo account proceed to be profitable in a real account. This is so because the demo account needs to be treated as a serious opportunity to test your knowledge, evaluate your errors, and improve your skills.
Open two demo accounts. One demo account seems the right way to go, but most people actually need two. One account should be used strictly to test ideas and methods. Use the second account to place hunch trades and try out your own ideas. This will allow you to improve your skills more quickly.
Key Demo Exercises That You Should Do Any Time!
These exercises are designed to test the analytical skills you have learned in this book. They are designed to stimulate thinking and for you to observe the market in a structured way.
KEY EXCERCISES FOR YOUR DEMO ACCOUNT
1) Scan the weekly forex charts, put on trend lines, and Fib levels. Find the location for your next trade based on this weekly chart. Would you be a seller or a buyer? Write down the specific reasons that led to your trading decision.
2) Place a 233 period exponential moving average and a 50-period simple moving average on the day chart of the currency pairs. Which currencies have penetrated or tested either one? Do these moving averages cross any key trend line or Fib line?
Note: Please see Abe’s book “Understanding Forex: Trading to Win” for the remainder of the chapter. Copies can be obtained from the Freebie section of forexhound.com
