For those amongst us who play, or have played, a sport at a professional or even semi-professional level would know to be good at the sport practice is an essential part of performing well.
Even if you’ve never played any sport at all you’ll likely appreciate the fact that those sporting personalities you see on the TV have got to the position their in through arduous training and practice.
So what does all this have to do with trading profitably on the forex market?
Well, just as kicking a football, or dribbling a basketball, or throwing a dart requires skill, trading well is an activity that similarly requires skill, and as skills can be learned we can hone them to improve our results.
How can you improve your forex trading skills?
My personal recommendation to anyone is as follows:
- Start with a demo account to become familiar and acquainted with your forex broker’s platform.
- Once you’ve done 20-30 trades and know what certain buttons on the platform do, start trading your trading plan.
- Once you’re comfortable your trading plan has been executed well and is making some money then start trading live with the smallest amount you can.
Nothing beats trading a live account.
While my preference is to demo trade until you become comfortable with your trading plan it does presuppose you have a trading plan.
What if you don’t have a trading plan? What if you’re trying to find a way to make money in the forex market? Moreover, what if it’s the weekend where you can’t demo trade? How can you practice?
Thankfully this is where a forex simulator can come in very handy. On the weekends you can put in the “screen time” to scan for new opportunities, and you can go back through your actual trades to see how you could better improve your forex trading.
We’ll explore one such piece of software that you can purchase to help you improve your forex trading.
Where can you practice forex trading?
There are three common ways to practice forex trading before you open a live trading account, and these are:
- Demo trading account. Most forex brokers offer the ability to open a pretend account where you can perform the same buy and sell actions that you would normally do if you had a live account.
- Paper trading. If you have historical forex data you can trade through the charts manually by picking your buy and sell entry and exit points. It is known as paper trading as people tend to print charts out and manually mark on where they would buy and sell. You may not physically print the charts out, but instead elect to scroll through them using your computer, however, the concept is still the same.
- Automatic back-testing. Again if you have historical forex data you can program your method to automatically back-test your buy and sell signals.
The least favourable of the three is the second option - to manually paper trade through historical data.
If you elect to go this way you will soon discover you have great results. If you’re like me you’ll find you justify why you didn’t have to take the bad trades and why you doubled up on the good trades. In essence, you cheat yourself!
It doesn’t take long to realise how futile paper trading can be when going through historical data.
I thought paper trading was dead.
But, it wasn’t until I discovered Forex Simulator that paper trading revived!
What is Forex Simulator?
In a nutshell Forex Simulator is a program that allows you to go back in time and manually test your strategy by buying and selling as you would have. It doesn’t require any knowledge of knowing how to code, and you have access to data going back as far as 1999.
The Forex Simulator allows traders to simulate their trading on an account which can be set to ANY balance, denominated in any of the following currencies: USD, EUR, GBP, JPY, AUD, CAD, NZD, and set to any of the following leverages: 25:1, 50:1, 100:1, 200:1, 400:1, but it can also allow you to take screen shots of the trades you take so that you can FURTHER analyse your trades to see how you can improve.
This is a wonderful feature as it helps you to further learn, and understand your trading to help refine your methodology. It’s like viewing replays of your sporting team only you can learn and study your own historical trades and see where you could have improved your entry and exists. And you are keeping records aren’t you? How are you ever going to be able to improve your forex trading if you don’t study your own performance?
It’s not until you begin looking at a whole series of charts that your brain will begin noticing familiar patterns with the setups you trade and by logging these charts into your mind that you’ll be able to begin seeing common setups. This is where manual testing has a huge plus over programmatic testing - you get to put in the chart time needed to spot new opportunities.
How does Forex Simulator help?
Once you’ve started trading on the simulator you can look at your trade snapshots and add comments as well as further filters to each entry to see which method works better.
If you like using indicators in your analysis the simulator contains many of the popular indicators, such as the RSI, MACD, Stochastic Oscillator, CCI, moving averages, even Darvas boxes and daily/weekly pivot points! You can also draw Fibonacci Retracements and time zones as well as basic trend lines. You also have the ability to plot multiple time frames.
How can you paper trade on economic announcements?
One of the hardest aspects with historical paper trading is annotating your charts to reflect economic announcements. These announcements can have a large impact on your trading as economic releases can fundamentally shift the price of a currency pair.
Thankfully, Forex Simulator incorporates this needed requirement by including economic announcement data.
How much historical data is available?
You can obtain free historical tick data from Dukascopy’s historical forex data for the following currency pairs: AUDJPY, AUDNZD, AUDUSD, CHFJPY, EURUSD, EURCHF, EURGBP, EURJPY, EURUSD, EURCZK, EURDKK, EURHUF, EURNOK, EURPLN, EURSEK, GBPUSD, GBPCHF, GBPJPY, NZDUSD, USDJPY, USDCAD, USDCHF, USDDKK, USDHKD, USDMXN, USDNOK, USDSAR, USDSGD, USDTHB, USDZAR
Time frames that are available include: 1 min, 5 min, 15 min, 30 min, 1 hour, 2 hours, 4 hours, 8 hours, and 1 day. This is one of Forex Simulator’s huge pluses.
What are the disadvantages of Forex Simulator?
Several things that could make Forex Simulator a stellar product would be:
- Have the ability to trade in lot sizes rather than in quantity.
- Cosmetically I’d prefer if the pause button was a button rather than a tick box.
- Custom designed entry/exit columns. Currently in the snapshot you are only limited to what the author of this program thinks how you would trade.
- Allow for partial closes. You can somewhat circumvent this by entering a new position in the opposite direction to the original trade.
- Better filters for the trade analysis snapshot area. I’d like to have a filter where I can see whether I trade better at certain times of the day, rather than the current date/time filter which just screens trades conducted within a date range.
- Randomly choose a starting point and hide the X-axis. After one or two runs of a data series your brain will begin to remember what’s going on and then preempt the moves, it would be good if the simulator could randomly choose a lesson and then hide the X-axis! I suppose it could distort the Y-axis figures too so that you’d never know what you’re trading!
How much is it?
Currently, the Forex Simulator costs US$149.95. So if you’re looking for a good time to buy I’d say now is as good as any.
In conclusion the Forex Simulator is a product that is adequate for new budding forex traders, and helps to improve professional forex traders by having them replay their own trades to refine entries and exit points.
Coupled with the economic announcement history you can further learn and see the impact of fundamental shifts in the price of currency pairs.
While the product has some good foundations to help you formulate a strategy and to spot new opportunities it can also help you to refine your methodology by providing detailed reports and snapshots of your trades.
You can demo the product for free, so give it a try and see your own forex trading ability improve.