There are two ways to demo trade the forex market. One way is to demo trade in the direction of the major trends of the market without consideration for an exact entry point or drawdown. The second way is to time your entry more exactly so that you become profitable almost immediately.
Demo Trading For Trend Traders
There are several forex trading styles, one trading style is trend trading. If a traders spots a great uptrend or downtrend on the higher time frames like the D1 and or W1 time frame, up or down, they can easily enter a demo trade with little effort and no consideration for drawdown. Entering trends at the beginning of the cycle is particularly useful and can lead to profits. The demo trade might have drawdown so it is suggested that you trade near the beginning of new D1 of W1 trend cycle or newly formed trend. Here are some examples.
Look at the top 2 examples, the D1 uptrend is close to starting and forming a new trend and these two pairs, the EUR/AUD and AUD/NZD, are in wide ranges. You can demo trade both of these pairs when the price starts rising on the smaller time frames. The third chart on the bottom is an exaple of a possible price breakout on the W1 time frame to the upside on the EUR/CHF. In these situations you are trading near the beginning of the trend or a probable breakout on a larger time frame. You are not trying to exactly time your trade so you may have some drawdown if you have a randomly timed entry point. However the upside potential of all 3 trades is very high so your money management ratio is excellent.
You can run other checks to increase your odds. On the EUR/CHF demo trade you can see if the other EUR pairs are trending up or if the CHF pairs indicate CHF weakness. This can be done in a few minutes if you use our professional chart setup using the metatrader profiles.
Demo Trading With More Exact Timing
The second method of demo trading is trying to time your demo trade entry so that you have little or no drawdown, looking for immediate profits, to take advantage of market volatility and momentum. For this type of demo trade we have a very good trading system including live signals, alerts and more exact timing procedures. Here is an example trade entry:
The CAD strength is obvious on our live forex indicator called The Forex Heatmap®. When demo trading with this type of system you are looking for little or no drawdown after you enter, because it is a momentum based trade entry. Then, if the GBP/CAD is trending down on the higher time frames, H4 or larger, then you have a chance to make more trend based pips going forward after your entry.
Combining Both Demo Trading Methods
If you use the second method to demo trade and your trend is in place is starting on the higher time frames, you have optimized your trading system. You can time your entries and also trade near the beginning of larger trend formation like the top 3 examples, to optimize money management and upside potential. Aftere some period of demo trading you can move to micro lot trading with stops, then mini lot trading, then full scale lots.