Everyone involved in trading Forex has seen them, practice accounts offered by brokers to help new traders get comfortable trading currencies in real time. While it seems like these free demo accounts would be effective, many new traders are deceived by the ease with which their account balance grows. The truth is that they are very deceiving and there's a single reason for it: Most brokers set the starting practice account balance at $50,000, in virtual money of course.

For a new trader, fifty grand is a rather large starting balance because many new traders don't have nearly that much capital to invest in Forex at first. With such a high starting amount, new traders are generally careless, trading currencies based on luck rather than gaining experience, using methods they have learned or trying out a signal service or other trading system.

In reality, there is a very small margin of error in Forex trading. While it's inevitable that traders will lose on some trades, it's very important to minimize loss(by utilizing the stop loss rate feature available with all brokers) and maximize profit(by using a proven strategy which has been perfected). The margin of error for new traders is especially tiny. New traders tend to have smaller initial deposits and, despite using proven strategies, will generally make more mistakes than those with experience.

Although the $50,000 practice account is common practice, there are some brokers which are breaking away from the pack by allowing new traders to set their practice account balance to whichever amount they like. I recommend setting it to the amount the trader will actually be starting with in the real account in order to gain the most beneficial real time experience and the best way to test a Forex trading system that the trader plans on utilizing in a real account.