When you're first starting out as a forex trader, it can be tempting to start trading real money right away, however, this may be a recipe for disaster. If you trade real money without understanding how forex trading really works, then the chances are you're going to make more bad decisions than good ones.

Fortunately, many reputable forex brokers offer demo accounts. These accounts allow you to trade in live market conditions, but you don't actually risk any money. Instead, you trade with demo funds, which are a good way to learn forex trading without risking your capital. Of course, none of your profits are real either, but the goal is to learn about the markets and to try new things, it's not all about making money at this point.

Learning the trading platform

For new traders, just learning how to use a forex trading platform can be overwhelming. There are so many charting options, so many different types of trades that you may make, stop losses to place, hundreds of different indicators available, and much more. Just mastering the mechanics may take a good while, and the last thing you want is to make a mistake just because the platform didn't do what you expected. A demo account is a great way of getting familiar with your tools – and it will also allow you to compare trading platforms from different forex brokers.

Trying out strategies

However, a demo account allows you to do much more than just get familiar with the trading platform. It is an excellent way to try out different trading strategies, and to become familiar with spotting chart patterns and trading signals. You may want to try out many different strategies at absolutely no risk, see how effective they are. Of course, there's no single strategy that delivers profits on every trade – otherwise everyone would use it – but you will learn over time how to identify high-probability opportunities in real trading conditions with a demo account.