Trading is no child’s play. While it provides unlimited possibilities for profiting, it can also involve a substantial degree of risk. Luckily enough, you stumbled upon this article. Because one of the most useful features offered by online trading brokers, especially for the the novice trader, consists of a free, no risk demo or practice account.
So, you want to become an online trader? We totally get that. Online trading is an exciting way to profit from rising and falling prices in financial assets. But just like an airline pilot training in a flight simulator, opening a trading demo account gives you the opportunity to practice trading without cost or risking a cent of your hard-earned money.
What’s a demo trading account?
The idea behind the demo account is to recreate the thrilling experience of real live trading as closely as possible. This way, the trader can get a real feel for how the platform works, as well as getting accustomed to the market and the various financial assets, all while sharpening different strategies and technique. The main difference is you won’t be risking real money, so you can explore and experiment with full confidence.
Since trading is carried out on a decentralized market, brokers offer varied trading platforms with their own price feeds. It is vital to test the features of the software before putting real money on the line. Failing to do so will eat up your investments faster than you can think. This is why it’s advisable to trade first on a demo account, before committing real funds to your account.
Advantages of a demo account
Find your asset – Those new to currencies, commodities or indices can use a demo account to see if they are mentally and emotionally suited to the rigors of trading. Everyone has different trading habits. Some enjoy trading currencies, while others prefer commodities like gold, oil etc. A demo account will help you find your niche.
No risk training – Novices who are still learning to trade will feel considerably more confident not putting their real money at risk before trying things out first. A demo account will allow you to open and close positions, learn how to apply stops and limits, view margin requirements, and track profit and loss, all in a risk-free trading environment. This way you can to learn from common beginner’s errors without having to pay for the consequences out of your own pocket.
Practice money management techniques – One of the secrets to long term success involves learning to implement tested money management principles. A demo account allows to practice such techniques thoroughly on real exchange rate movements and to see for yourself how your actions can grow your virtual profits.
Learn to manage your emotions– One of the most challenging aspects of trading for many involves learning how to manage their emotional responses to winning and losing trades in such a way that it encourages overall profitability. Dealing appropriately with otherwise normal psychological responses to making and losing money — such as fear, greed and hope — can often distinguish the successful trader from the loser.
Test your trading strategies– Smart traders will generally want to test the success of any new trading strategy under real market conditions before implementing it in live trading. This allows them to accustom themselves to a platform, such as the widely popular MetaTrader4 or Sirix, and work out any bugs that might become apparent while using it.
Check out the broker’s features and services – Online brokers eager to have you open a live trading account with them will often give demo traders access to their special client features, educational and news services, and customer support departments. This can be a great way to check out the quality of the broker’s overall services before committing any real trading funds to make sure that they are the kind of trading partner you will want.
A few tips before you start
- Treat your demo account as if it were real money. Set your starting equity to the same amount that you would use in a real live trading account.
- Connect yourself to the emotions of trading and learn to control them.
- Take your demo account seriously, follow your plan, use the risk, leverage and position size management options.
- Learn from your mistakes and gain complete confidence in your trading plan.
So, how do you start? I’m glad you asked.
Just about any reputable online broker will allow new and current clients to open a demo account equipped with anything from $10,000 – $50,000 in virtual money, free of charge to practice with. A demo account is very easy to set up. Usually it involves no more than completing a simple form with your email address, username and password, and from there you can get started. We recommend the MetaTrader4, one of the most popular and widely used trading platforms, as the ideal trading platform to begin with.
Trading the largest financial market in the world does not suit everyone. Many times, people rush to trade, without understanding what’s it’s all about and end up in disappointment, not to mention the loss of money. Whether you’re a new trader trying to learn the ropes in a realistic environment or a seasoned forex trader looking to check out a new online broker, platform or strategy, a demo account can be the smartest and most useful way to practice the latest earning techniques without the added element of losing real money.