A forex demo or practice account is now available on most any online broker site you and find on the internet. These accounts are very good for the inexperienced trader because they can often get a trader used to the platform that he/she will be trading on with real money soon.
Yet there are also some problems with using a demo account first.  The demo account lets you demo the forex software and allows you to trade as much as 100k of “practice money”.

The practice account can be both beneficial for the broker, since many demo accounts are shortly moved to a “real account” and real money is deposited by the investor.  The demo account can also be helpful to the investor by allowing them to learn to trade on this new platform and learn forex trading in a live environment.

Trading currency is no simple task, and many traders do a substantial amount of reading, analysis and following charts before making a serious trade that involves the risk of their money. The practice account is by no means “real money” and may contribute to an inexperienced traders confidence when he starts making practice money within the demo account by trading large 100k lots with no little or no thought of risk; after all, it’s not his money he is using to trade.

The overconfident investor can be born from a practice account very easily, and take substantial risk later on using a real account. This could lead to heavy losses now associated with the real account. If the investor had started with a real account, most likely his exposure would have been limited by his risk appetite.

The key lesson learned here is if you take things carefully, with a bit more forethought, you can become a successful forex trader. The practice account is very useful, but you must learn what its general function is, and that is teaching you how to trade. So if you don’t risk money in the practice account, most likely you won’t do the same in the real account.

The best transitional account you can have after using a practice account is a min-account where most of the lot trade sizes are around 10k and the account can be opened up for around $100-$300. This way, you will have no alternative but to trader in lower margin increments that will help you realize the risk involved in trading from a larger account.