Forex Trading is often learned by using trading simulation. The easiest way to do that is using demo accounts. There is a also special simulation software. Compared to demo account, it is more advanced. It can accelerate of slow down the market, or easily start from scratch. And computer simulation is essentially the same as “paper trading” that was used before the PC became affordable to masses.
At the first glance, the idea is clever. Simulators are used virtually everywhere, even in pilots’ training. Pilots are responsible for peoples’ lives – so what can be wrong with the idea of learning forex trading by simulators?
There are principal differences, though. Flight simulators are useful, because airplanes have a lot of different controls that a pilot needs to learn. Doing that in simulator is a way to avoid the risks of their misuse.
Now, let’s take Forex. On the contrary, Forex trading is technically very simple. You either buy or sell. Of course, there are multiple positions handling, stop losses, risk management, etc. But these all are technicalities. Learning them is important but on itself does not train you in the main component of Forex trading.
Forex Trading Is About Psychology
The problem with learning Forex trading in simulators is that it is too comfortable. But real Forex trading, when there are your own money at stake, is very stressful. And the simulator doesn’t principally teach you how to manage your stress. You might think that you learn some skills that can be then reused in real trading. But this might only work for some, but definitely not for all.
Our Smart Forex Strategy Tester framework can easily be modified to support simulation mode. We are planning to do that, but we don’t see it as a first priority. For majority of us simulators will only do bad service.
Renowned traders don’t recommend paper trading, either. E.g. Raghee Horner (“ForeX Trading for Maximum Profit: The Best Kept Secret Off Wall Street”) and Courtney D. Smith (“How to make a living trading foreign exchange: a guaranteed income for life” our review).
The best way to learn Forex trading is to trade for real. Micro lots are excellent way to start.