Forex Trading: Are demo and live accounts the same?

Forex trading is a process of buying and selling currencies while speculating their price to make a profit. It has become a new business across the globe as many people are making a considerable amount of money following it. As per statistics, the daily trading volume in forex trading is around $6.6 trillion and it’s increasing by the day. 

However, what you need to understand is that trading currencies can be risky. It requires a lot of calculations. With good calculations, you can make a significant amount of money. Similarly, if the calculations aren’t done right, you can lose the money you’ve invested and it can throw you into the pits of losses and depression. 

Now the question is, how can you safely trade and stay on top of your game? Thankfully, there are ways you can do that and be safe in the process. In this article today, we’re going to discuss everything in detail, from setting up a forex trading account to looking into different account types, the demo, and live accounts.

Getting started with forex trading

If you’re new to the world of forex trading, the first thing that you need to do is know all its ABCs. It starts with creating a forex trading account. For that, you may need to collect some information first. It will help you in filling up the online application form. The information involves your full name, residential address, and contact details. Apart from that, your date of birth, nationality, tax ID, social security number, and employment status are also required. 

Sometimes, they also ask about your net worth, annual income, trading objectives, and trading experience. Once you have all this information, you can visit the broker’s website and fill out the online application form. Make sure to add the amount of money you’re willing to invest and the currency type to the form. After completion, you’ll be provided with a username and login credentials. Using the username and password, you can log into the broker’s client portal. 

The third and last step involves arranging the transfer of funds from your bank account to your forex trading account. It could be through your mobile banking app or credit or debit card. Also, before that, please make sure to check the interest rate that applies to different payment methods. After that, you can confirm the transfer method, transfer the amount you’re willing to invest to your forex trading account, and start trading.

Difference between demo and live accounts 

Many people make the mistake of directly creating and using a live account. Due to lack of practice, they often end up losing money because of the little mistakes they make here and there. It is precisely why most experts recommend creating a demo account before getting into the real world of forex trading. 

Now the question is, are demo and live accounts similar? Well, they work in a similar manner but no, they’re not the same. Now let’s compare demo and live accounts and check out the difference. 

Demo accounts 

Many brokers provide a free training account known as a demo account so that you can practice before creating a live account and starting forex trading. A demo account allows you to get real-life experience in the forex market while experimenting with virtual currencies. It provides you with a chance to put your theoretical knowledge to practice. 

You can look into different forex trading strategies and start practicing. The more you experiment with those strategies, the easier it becomes to join the forex trading world. In this way, your invested money would remain safe once you start the actual trading. What you need to know here is that a demo account involves absolutely no risk, so there’s nothing you need to worry about. All it does is help beginners. 

Live accounts 

A live account is the one your broker provides you with for real forex trading. It is connected to your bank account and that’s how you invest your money and get a profit. There are three types of live accounts available for anyone who’s looking into forex trading. 

The first one is a micro or mini account. It comes with a small cap and allows beginners to deposit small amounts like $30, $50, or $100. It is something that minimizes the risk and decreases your chances of potential losses. Though a mini account works exactly like others, it has some restrictions to control risks. 

The second one is the standard account. Also, referred to as a gold account and a premium or a classic account, it has a minimum deposit limit of $100-$500, depending on the broker. It allows you to make mini-trades. The advantage of a standard account is that brokers provide great perks for investors with standard accounts because standard account owners have good up-front capital to make trades.

The third one is a professional/VIP account. VIP accounts are for people who can afford a minimal deposit of $1000. Brokers offer great benefits for people with VIP/professional accounts. From travel packages and technical market analysis tools to access to debit and prepaid cards, there are many perks for VIP account holders. These accounts are intended to provide a rich environment for traders.

The takeaway

Forex trading has helped several people make millions and even billions. It has become a new trend post-Covid-19 pandemic as more and more people are realizing the significance of having a passive income source. If you’re looking into forex trading as well, you must start by creating a demo account. You can then practice a few strategies and shift to a live account, and start forex trading.