In 2018 we have simulators for everything. Cooking simulators, airplane ones for pilots, simulators for the military – even sexy time simulators. The simulators that we care about (well, beyond the aforementioned sexy time ones) are Forex simulators. Let’s see what they are, what they do and if you should actually give a red pixel’s care about them.
What is a Forex Simulator?
A Forex simulator is a piece of software, either offline or online that provides you with a virtual environment to trade in. This is usually bundled with a demo account with virtual credit (yeah! Fake money!) to test your abilities. Therein lies the value of a Forex simulator – it gives new traders a safe place with no financial risk to get used both their brokers trading platform and trading with live rate. Many new traders (or even experienced ones actually) use these environments to test new strategies.
New traders have the tendency to read everything when they start their careers trading, get over-confident, trade way too early causing losses. Many trading educators will recommend that you shouldn’t go live if you can not create consistent returns in a virtual environment for an extended period of time some say 3 months others cite 6 months.
Hallmarks of a Good Simulator
To be fair you aren’t exactly looking for a simulator per se but more the best Forex platform and broker available. So, what are you looking for? First and foremost: transparency. If you visit your broker’s website and can’t find their funding and withdrawal fees, forex spreads (or their method of calculating variable spread) and other broker fees – that might mean they will charge you hidden fees when you really start trading.
You might be wondering why I am referring to trading conditions when referring to a risk-free simulator – it’s a simple explanation, the spread and fees your broker charges you once you go live need to be calculated into your bottom-line or “break-even” level. If there are fees you are unaware of it might diminish or complete destroy your profits. If you are trading with a forex simulator, unaware of all the variables, all the costs that are cutting into your profits, then you aren’t getting the full picture. You will be ill-prepared and miscalculated strategies will derail your investment goals.
When should you use it?
Its most obvious use is to help you learn about trading, testing your strategies and familiarizing yourself with the tools and conditions your broker offers. Another function of a forex simulator is the ability to test EAs (Expert Advisors – a type of software that automates trading) – which is beneficial for more experienced traders.
This is where forex simulators are slightly misunderstood – they are usually considered a tool for the novice trader but it can be an equally powerful tool for an experience trader. They can use it to pilot new strategies, problem shoot them and fix bugs they may have. The most unexpected use is for people that don’t even trade. For example EA developers can use Forex simulators to test their systems, show repeatability or even performance.