A forex simulator is software that imitates/mimics real financial markets. Usually, it’s the foreign exchange market or the stock market simulations that are used.
Any profession in the world requires time to learn specific skills to perform certain tasks. A major problem in my humble opinion is people coming into forex and in so little time expect results.
No due diligence is paid to learning and horn concepts before diving into trading.
Moreover, most forex simulators simply give you the means to reverse the market to a time period of your choice. Thus, concepts can be tested and strategies created in real time; backtesting.
Backtesting
Backtesting involves using previous price data to test the accuracy and reliability of a strategy, practice skills, etc.
It is important to backtest in order to gain adaptability to various market conditions, know if the strategy is reliable, and recognize the best market conditions the forex strategy thrives in.
Every strategy has a flaw and losses will be incurred. Backtesting enables forex traders to recognize these flaws and work their way around them.
Perks of Using a Forex Simulator
- The accuracy and risk-to-reward of forex strategies can be approximated before risking actual money.
- Backtesting forex strategies build confidence in a trading system, which is required before moving to a live account.
- A trading plan cannot be created without backtesting as they work hand in hand.
Disparities Between a Forex Simulator and Live Trading
Trading live brings forth a lot of underlying emotions because actual money is being traded. A few of these emotions are anxiety, and greed which are very normal.
To manoeuvre this, only invest amounts that you can afford to lose. Also, psychology books can be read to avoid emotions influencing trading decisions.
Forex Simulator Software
The go-to software for forex stimulation is the Metatrader 4 platform which can be installed on Metatrader4.com.
It was released in the year 2005 and it is the most used platform by retail forex traders. The meta trader is a charting platform that provides accurate data on currency pairs, stocks, etc.
Moreover, this software bridges the gap between retail traders and brokers. Brokers provide a meta trader login to your mail; therefore, orders can be placed seamlessly.
The desktop version of the MetaTrader platform has an inbuilt forex simulator named strategy tester. This can be accessed on the main menu under the ‘view’ section.
Clicking on the ‘view’ button displays a window below your screen and it can be expanded.
Here, the currency pair to stimulate is chosen, time frame and specific period of market prices can be customized.
The inbuilt stimulator aside, other ones can be added to the meta trader platform. The most popular ones are Soft 4 FX which there are loads of tutorials for on youtube.
Soft 4 FX
Soft 4 FX is a free forex stimulator that can be accessed by every trader. It provides accurate data alongside economic news which is governed by forex factory.
Before this service can be used a file is downloaded on the official site. Once done, it’s moved into a specified folder and it’s ready to set up.
Then, under the ‘navigator’ scroll until ‘expert advisor‘ is found. Now, under ‘tools’ click on ‘options’, toggle to the expert advisory section, and allow DLL inputs.
Go ahead to open any chart hold and drag the Soft 4 FX file as seen under expert advisory onto the chart.
Lastly, install all data for all currency pairs needed in the data centre and you’re good to go.
Is Soft 4 FX Free?
The Soft4fx stimulator is one of the most used forex stimulators out there. It can be used on the Meta trader platform on a PC or desktop.
These stimulating harnesses the charting prowess of MetaTrader to the fullest. Multiple time frames can be used and charts can be viewed in different formats.
The stand out for me though is how economic data at the time of the past data is displayed. Furthermore, the data is provided by the forex factory which is an industry-leading site with respect to foreign exchange news.
Advantages of Backtesting Forex Strategies With MetaTrader
The MetaTrader platform is completely free to use there are no restrictions on time frames to backtest. The forex stimulator can be used offline and chart templates can be applied.
Forex traders have a variety of plugins to choose from to further improve the backtesting experience.
Forex Simulation With TradingView
Apart from the MT4 software, TradingView is an alternative for simulation. This site is user-friendly since no installation is required so charts can be accessed from every device while in sync.
Forex charts aside, stocks, options, crypto, etc. can be backtested on this platform.
After selecting a char of your choice, the ‘Bar Replay Feature’ is enabled. The icon can be found on the horizontal toolbar at the top of your screen.
When the icon is clicked on, a pop-up menu appears with a couple of action buttons. The first icon displays a blue vertical line that can hover around to choose the desired time stamp.
While the second icon from the left adjusts the speed of the replay or simulation.
Without purchasing the premium version of TradingView, the ‘Bar Replay Feature’ can only be used on daily charts.
Although a free trial of 30 days is offered, the starting price of the premium version of trading view costs $14.99 per month.
There are loads of platforms to simulate the forex market, the most popular being the meta trader 4. Once this software has been installed on a PC, users can easily backtest. For more features that suit your needs, third-party simulators can be added to the Meta trader.
Basically, when forex is stimulated, the movement of live markets is cloned. The whole point is to imitate live trading conditions to get a similar feel.
A couple of software these days offer this service although it cannot be accessed on mobile devices.
Summary: Forex Simulator- A Deep Dive
Forex simulators can be an extremely valuable tool to forex traders. It takes time to master trading concepts and fully develop a trading plan.
Instead of waiting around for prices to develop on live markets, simulators can be used. Traders can master their craft without having to put real money on the line.
Also, good trading habits can be developed while the bad ones are identified and curbed.