What to Look for in the Best Forex Simulators (2019) |
Posted: June 13, 2019 |
The foreign exchange (forex) market is one of the busiest financial markets in the entire world. In fact, trillions of dollars (and other currencies) are passed through the market every single day, creating plenty of opportunities for ambitious traders. However, while the potential to profit from the forex market is readily known, there are still quite a few things you will need to do in order to assure your positions are actually winners. Without paying close attention to the details and developing a strategy that has been proven to work, your portfolio will be destined to fail. In order to make sure they have a strategy that is ready for the actual market, many forex traders will begin with a practice known as paper trading. While these individuals are trading “on paper”, they are not actually risking any money. Instead, they are simulating a possible trading strategy and testing to see if this strategy produces the outcomes they are hoping for. Because paper trading is such a common (and much needed) practice, there are naturally many different forex simulators available for you to choose from. While many of these simulators are almost mirror images of one another, the differences between them should still be accounted for. In this article, we will discuss the most important things for you to keep in mind when comparing forex simulators. By taking the time to do your research and understand the different options you have available, you will be able to find a simulator that can help you succeed. Cost and Commitment Naturally, the first constraint you will need to address when comparing forex trading simulators is cost. In the past, the top simulators would all have a usage fee attached to them. However, over the past decade or so, things have rapidly changed. While there are still some cost-intensive simulators in use, many of the best simulators can now be used for free. Even if you are hoping to avoid paying for a forex simulator, there are still plenty of quality options available. You should also confirm that the simulator you are using does not require any indirect financial commitments, such as a promise to use a paid service in the future. “Freemium” products—products which give you part of the package for free and then demand payment—can also be easily avoided. Available Currencies The global currency market is incredibly complex. As a result, many of the world’s top currency trading strategies will require the use of multiple currencies at once. By trading multiple currencies, you can diversify your overall holdings and also have several unique opportunities to increase your daily ROI. It will be important for all new traders to choose a simulator that allows them to experiment with trading the world’s top currencies:
There are plenty of other currencies that are available to trade as well, though this list contains the ones that typically have the greatest influence on global markets. Live Price Feed When choosing a forex trading simulator, it will be important for you to consider what the simulator is actually telling you. When you log into your account, are the numbers you are looking at made up? Or are these numbers real? In order to assure that your new trading strategy has what it takes to make it in the “real world”, you will need to select a simulator that provides you with an accurate, live feed. This will also make it much easier for you to determine your preferred trading timeframes (something that can have a major impact on your bottom line). Essentially, the more your simulator is able to resemble a real-life trading environment, the more likely your strategies will actually succeed. Simulators that allow you to account for things such as trading fees and other variables will enable you to be even more precise. Back Testing and Forward Testing As the terms might imply, “backtesting” involves using a historical record and testing your strategy at various points in time. “Forward testing” involves simulating a future trading environment and seeing if your strategy will still be successful. Backtesting is important because it allows you to see how a strategy would fare under various different conditions. For example, you could see how your strategy would have fared during a recession, following announcements from the Federal Reserve, and under other real-world conditions. You may quickly discover that your strategy only works during very specific circumstances and will require a bit of fine-tuning. Flexible Account Options As suggested, you will want to choose a trading simulator that can create situations as close to what you’ll be experiencing as possible. One common criticism of some trading simulators is that they only allow you to test a “generic” investment of $100,000. While the generic simulation is usually fine for determining which positions are actually winners, it can end up distorting your daily profit margins (due to the marginal costs of trading). Instead, you should look for a simulator that allows you to trade using any amount of money you see fit. Being able to adjust things such as stop losses, portfolio composition, speed of market movements, and other variables will allow you to quickly establish a competitive advantage. You will also want to look for trading simulators that allow you to run multiple different simulations at once—this makes it much easier to directly compare two potential strategies and decide which strategy comes out on top. User Interface Lastly, it will be important for all prospective traders to choose a trading simulator that is easy to use. Because many of the world’s top trading simulators are free, you may want to try a few of them out and see which you are most comfortable working with. In general, you should strive to select a simulator that is easy to use and highly intuitive. Being able to make adjustments to your trading strategy with only a few clicks will be very beneficial once you are live-trading in the real world. The user interface of these simulators is where you will find the greatest amount of variability, meaning this is the detail of the comparison process that probably needs the most attention. Conclusion Before you get too excited about exploiting the world of foreign exchange, be sure to backtest your strategy and confirm your approach to the market is one that would have been historically profitable. Trading simulators will give you an excellent opportunity to try bold new approaches and see which ones actually work. By keeping these variables in mind, you should be able to find a simulator that meets your trading needs.
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