Simulated Forex Trading 101: All You Need to Know

If you have been trading for some time, I know simulated forex trading is not a new word to you. Personally, I credit my success in forex trading for the significant time that I spent on virtual forex trading platforms when I was starting out.

Becoming a successful trader calls for patience, dedication and experience. Simulated forex trading speeds up your journey as a trader by providing convenient and risk-free ways to trade the market.

Simulated forex trading has striking similarities with real trading: price quotes move in the same way, same charting tools, and it can close and open trades.

Maybe you are not conversant with what is simulated trading? Read on……

Trading Simulators

A good way to test the techniques and other essential trading strategies without risking any money is through simulation trading.

A trading simulator is a visual way of practicing trading in a real world and real-time simulated trading environment.

Hundreds of trading simulators are available online and offer simulation trading for forex, stocks, options, futures and other financial instruments.

By using a simulator, traders, especially beginners, can experience the ease of learning how to trade without risking any money.

Professional traders can as well learn and discover new strategies and sharpen their old techniques without having anything to lose.

A good example of a forex simulator is Think Trader (formerly known as trade interceptor) that offers traders a trading gym to practice and experiment with their forex trading strategies. It entails a simulated forex trading software that I have used for some time.

Below is a preview of how it looks like

trade interceptor

Common Mistakes that Newbie Traders Make

Inexperienced traders (beginners) tend to make mistakes, some of which lead to huge financial losses.

These are some of the common mistakes:

  • Misuse of leverage –The financial leverage that is placed on a trade can be increased on purpose or by mistake. Putting in action leverage on a demo account can help a trader to understand how to use leverage properly and safely.
  • Order entry and exit errors –These are often as a result of an unplanned ‘mouse click’. Sharpen order entry skills and avoid these mistakes by using a demo account.
  • A periodic lapse in discipline – A forex simulating software can give an illustration as to how expensive trading can turn out.

When carefully used, a trading simulator can reduce the number of unforced errors at the same time help promote good trading habits.

Simulated forex trading can be instrumental, especially in the development of new ideas and fine-tuning the existing approaches.

Understanding Simulated Forex Trading

Understanding how simulated forex trading works is of great importance.

Technically, it is about creating an ‘artificially challenged environment.’

This means that it’s not just another practice session, but an activity that you’ll have to be completely engaged in

The good thing about a trading simulator is it replicates the same emotional elements of the market.

It gives you the opportunity to move back and forward in time and trade the market on a selected day.

With virtual money in the account, you can completely have the experience of a real trade.

Simulated forex trading does not offer a one-sided platform for practice.

It is a very dynamic and interactive medium that adds multiple layers to the trading experience.

For instance, it introduces various market indicators and charts to the trading platform. You also have access to the economic calendar and can create realistic trade triggers.

You can place your orders, modify and even close them just like with a real account.

Prices also reflect historical trading data.

Compared to the traditional paper trade, you have significantly more action; this includes the speed of the simulation, which can be adjusted.

Depending on how adept you are, you can adjust your trading as you need. You can skip the less important things and focus on what is important.

With the help of software, you can train yourself on how to approach the market. So effectively, it brings comprehensive market know-how that is aimed at overcoming your trading fears.

It eventually aspires to maximize the overall profit from forex trading.

Benefits of Simulated Forex Trading

Simulated forex trading gives traders the same trading environment as in the real market, only that it’s risk-free.

It allows the trader to practice on historical price data, replicating the usual trading experience as with the real market.

Some of these benefits include:

  1. A risk-free environment-a forex simulator allows you to conduct trades on a demo account without having to risk any real money. This gives you the opportunity to
  2. Adjustable timing-While in real trading you ought to wait for the daily candlestick to close, you can fine-tune the speed of the FX simulator to obtain more candles, hence more trades, and this results to more practice during a short period. One day’s worth of data appears in just a minute on a good Forex simulator.
  3. Live simulated quotes-All price quotations in an online trading simulator move in the same manner as in real trading.
  4. All trading tools are at your disposal– While initiating your simulated trading exploration, you can use all the tools in your trading platform to analyze the market. This will not only help you familiarize with the tools but also the other features on the platform.
  5.  Test dozens of strategies without any risk – A Forex trading simulator also allows you to test different trading strategies and pick the one that gives the best results. Be sure that the strategy matches your personality and trading style, and test it in a risk-free environment before moving on to trade in a live account.

Why Should you Paper Trade your Strategy?

Paper trading is another effective way to simulate forex trading and to get the most out of it.

Paper trading involves the opening and closing of trades on a piece of paper by using historical price data from the chart.

Using MetaTrader 4, you can scroll through the chart moving it bar by bar and then take the simulated trades on paper with stop loss levels, entry points position sizes, take profit levels together with the reasons why you made that trade.

Your paper trades should have the following information:

  1. The entry price
  2. Currency pair and timeframes for managing the trade
  3. Position size, that is, if you want to analyze the performance of your risk management
  4. Exit levels (take profit and stop loss)
  5. Results of the trade; winning or losing

Paper trading still is a great way of practicing your trading, even with computers.

You’ll have a nice overview of all your trades as well as their performances on the paper, and you will be able to analyze them even with the absence of a computer.

However, paper trading does not take into account liquidity, spillage, the price and the spreads.

To get a more precise image of your trading performance, you will have to calculate the spreads and fees into your exit and entry points.

Simulated forex trading

Conclusion on Simulated Forex Trading

Simulated forex trading can be considered as one of the keys to your success in forex trading.

Whether you just want to grasp the strategies, or master every aspect of the forex market, it will help you.

Packed with many important features, it is interactive and needless to say; it improves the profit of the trades you take in general.

However, before signing up for any simulated forex trading arrangement, pay close attention to details and find out the range of features that are offered.

Only with a complete understanding of the system will you profit from a trading simulator.

Your can try to use the trading simulator that I have highlighted above, or you can find a different one that you think is the best free forex trading simulator. You don’t have to be splashing your money on a virtual trading platform as you commence.

In case you have any question regarding simulated forex trading, just shoot me an email.



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