Simulated Forex Trading helps us to become better traders and protects us from the bad habits of trading. It is the best most effective method of practise trading without any risks. On this page, we will study how to achieve a live market experience and find out the advantages of using a forex trading simulator software.
To determine whether forex trading is suitable for you or not, you have to be involved in the market. With the help of real-time historical data, traders can decrease their learning difficulties and easily determine whether forex trading is for them or not. Simulated forex trading does not raise a few issues. Sometimes, time and positive results on a demo account are not necessary will show the same results in a live trading environment. This thing forces people to think about the validity of simulated trading.
You will get complete details about simulated forex trading on this page which help you determine if simulated trading is really beneficial or not. Here we also tell you about some best forex trading simulators and how they perform well in the market.
What is Simulated Forex Trading?
A forex trading simulator is a type of software that helps you to examine your strategy offline by using historical data from the market. You can test your new trading strategies on this software before performing them on live trading. This thing helps you determine which strategy will work for you and which one does not. Due to this step, you can reduce your losses.
A demo account is the best example of a forex trading simulator. Most of the forex brokers provide a similar environment of live trading on a demo account. On a demo account, you can open and close trade and revive orders in a similar way to perform trade on a live trading account.
Advantages of using a forex trading simulator are:
- Create an environment similar to a live trading environment.
- Provide a platform to backtest and forward testing of trading strategies.
- Examine new trading ideas to test whether they work on live trading or not.
- A risk-free trading account consists of all the trading features and functionalities of live trading.
Forex trading simulators help you to test your trading strategies which can play an important role in reducing your losses. It allows you to improve your trading skills and strategies. Some top forex brokers who provide a demo account feature with their live trading accounts are 101investing, TradeATF.
Key Benefits of Simulated Forex Trading
Simulated forex trading provides an exact similar environment as a live trading session only risk-free. It allows you to test strategies you create with the help of historical data, whether they work on live trading. Check here some key benefits of simulated forex trading.
- A risk-free environment is the major benefit of simulated forex trading. A forex simulator provides you with a risk-free environment on a demo account where you trade with virtual money. Here you do not invest your real money in trade, and you only use virtual money for trading.
- Live simulated quotes: All price quotes displayed on an online forex simulator fluctuate similarly to live trading sessions.
- Adjustable timing: Forex simulator allows you to adjust the speed of the forex market to gain more trade, more candles and allow you to do more practice in a short time period. But during a live trading session, you need to wait for the right time to perform trade. Forex trading simulators help us see one day’s worth of data in a minute, allowing us to do more practice.
- Trading Tools: All the trading tools which are available on live trading platforms are also provided on a forex trading simulator. You can use all trading tools on a demo account for analysing the market. This allows you to become friendly with these tools as well as with the multiple features of live trading platforms.
- Examine your new trading strategies: You can test various trading strategies and can pick one which is best for live trading. Select strategies according to your trading style and experience. Must test your strategy on a demo account before applying on the live trading session.
Key factors for selecting best Forex Trading Simulators
There are several forex trading simulators available in the market. But before selecting them, you need to keep some factors in your mind to fulfil the trading style requirements.
Live Pricing Feed
It is essential to check that your simulator consists of a real market environment that shows live price data. Without live price data, you do not get the opportunity to test your trading strategies efficiently. Live pricing sustainably copies the spread which means while you apply your strategy on a simulator, it uses the actual spread of the market. It is an important feature that helps you to learn how to gain profits from market spreads. Consisting on-time price data helps you to check that your backtested results are correct or not. Through this factor, you identify whether you can trust the simulated historical data available in the software or not.
Forex Trading Simulator Historical Data
You may require accurate historical forex data that goes several months back. Not having sufficient historical price data to simulate the presentation of your trading strategy will move towards unrealistic backtested results. The best forex simulators always consist of historical price data. It may also provide you with a browsing feature through which you can borrow historical quote data of your specific currency pair. Apart from the end of the day quote data, the database may also consist of intraday quotes. It doesn’t matter which trading style you are following either it is day trading or swing trading. The best forex trading simulator will help you in any condition.
The historical price data should be arranged in a clear manner so that you can easily determine the high, low, close and opening price of the specific currency pair and selected time frame. For example, If your trading strategy is dependent upon volume, then you may also receive the tick volume information. It is necessary to have control of the volume data.
Flexible Virtual Money Account
As per the research, we see that most of the traders do not treat virtual funds as real funds. Always start with the amount which you need to invest in live trading. There is no worth in using more money on a demo account which you are not going to invest during the live trading. If you practice with a high amount, it is not worth practising on a demo account. Through this, you only enhance your expectation which is not a part of a realistic risk management strategy.
Suppose you use a similar amount of money that you are going to use at the time of live trading. Through this method, you do not face problems while you transition to live trading. While you begin trading on a demo account, you may not be required to use your real funds. Must select a free forex trading simulator that consists of minimum trading tools and trading features.
Select a powerful trading platform for simulated trading.
It is necessary to determine whether the trading platform which you are using while daily trading is having a significant impact on your trading performance or not. Investors spend multiple hours on their trading platform every day if they follow a day of trading and scalping. So trading platforms may also play an important role in live trading. Once you have done with forex simulated trading, it’s necessary to select the right trading platform which you are eager to use while doing live trading.
One of the most famous trading platforms between retail traders is the MetaTrader 4 platform. It generally consists of all the essential features which you require while doing daily trading, such as charting tools, flexibility, a user-friendly interface, a wide range of market orders, and a large & supportive online trading.
MetaTrader 4 also provides a simulated trading option to their users. You can do it manually or automated via its built-in strategy checker. Learn how to use the MT 4 trading platform to simulate a live trading environment through historical data from here.
Manually Backtest of strategies through MetaTrader 4
MetaTrader 4 consists of various features that support and enhance your trading results. Manually backtest is one of those features that help you to test your strategy and replicate a live market environment by historical price data.
Normally open your MT 4 trading platform and pick your specific currency pair and timeframe. Now roll back your chart to collect some historical data. After this, press the F12 button to move your chart bar by bar to the right side.
Be careful that the button should be titled “move the chart at the end with tick incoming”, as shown in the above image. Or the chart will generally move to the last price with each new tick. Through this feature of MetaTrader 4 will help you to get familiar with the platform, your trading strategy, and the multiple charting tools, which is the default feature of MetaTrader 4.
After pricking a specific timeframe and currency pair, do not forget to replicate your trading by various timeframes and pairs. Must note that not all currency pairs and timeframes react similarly under the same market condition. Longer timeframes generally return better gains by technical trading methods. Multiple currency pairs can approve multiple tools and create particular chart patterns gain and gain. Must replicate your trading using multiple currency pairs and time frames.
Automated Backtesting on MetaTrader 4
MT 4 also allows you to replicate the result of trading robots known as Expert Advisors. Expert Advisor is a program that automatically opens, handles, and closes your trade depending upon predetermined technical parameters.
For opening a strategy tester on the Mt 4 trading platform, press the keyboard key “CTRL+R” and click on the expert advisor which you want to replicate the currency air, timespan, and timeframe. Now click on “start”. MetaTrader 4 will rely on the Expert Advisor over historical price data and replicate its result along with the same profits and losses that the EA would return.
After this strategy tester stops moving the replication, now you are all ready to click on the “result button”, “Graph”, or “Report tab” for analysing the result. The report will consist of all necessary information which you want to know regarding simulated trading performance, involving gross loss and profit.
Apply to Stop- losses while using a demo account
Stop-loss order is an efficient tool of risk management strategy, and it may also be used on a demo account. The main motive behind this is that you need to be addicted to using stop-loss orders on all trades which you perform. Try to use various tools on a demo account before starting trading on a live account because you will get used to those tools.
A Stop-loss order protects you from huge losses and saves your trading account from automatically closing during an open trade when the price touches the predetermined price level. There is no other tool available to reduce loss rather than stop-loss order. All profit trading strategies involve stop-loss orders where you need to stop while trading automatedly.
Learn simulated forex trading through this article. Collect complete details about forex trading simulators and how to use them for efficient trading results. A demo account is the best place for practising simulated forex trading. Check the benefits of forex trading simulators which protect you from huge losses. Some top brokers who offer a demo account along with a live account are 101investing, PrimeFin.