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What is forward testing in forex and how does it differ from backtesting?

Forward testing, also called paper trading or demo testing, applies a strategy in real-time with virtual funds. Unlike backtesting, it shows performance under live conditions, including spreads, execution delays, and emotional reactions. Institutions run forward tests before allocating capital to ensure systems adapt to current liquidity. Retail traders benefit by practicing discipline and refining entries in real markets without financial risk. Benefits: realistic validation and behavioral training. Risks: demo trading lacks emotional pressure, and results may differ with small live accounts. Forward testing bridges the gap between theory and reality, making it a critical step before full-scale live trading.