One of the most common trading FAQs we get is about how, or why, you should use a Demo trading account. Our usual response is that it’s one of the most valuable things you can do – especially if you’re new to trading. The main reason being that a Demo account uses virtual funds, hence you’re never putting any real money at risk. At the same time, you’re still getting the same functionality and trading experience as using a Live account, making it the perfect way to learn how to trade.
Different ways to use a Demo Account
If you’re already a trader, a Demo account can be just as useful. Because of the lack of any real-world consequences, it’s the perfect place to test out new strategies.
The following are some examples of where a Demo account would be ideal to existing traders:
- Testing new strategies and EAs
- Changing up your trading styles. For example, switching from day trading to night trading
- Trialling new lot sizes, stop loss levels and tools
- Sate your curiosity in trialling Commodities or Indices
- See how some different currency pairs perform against your favourite
But there’s a danger of being reckless with a Demo account.
That’s because when you’re trading in a Demo account, you’re not trading with any pressure - there’s literally nothing to lose. As much as you like to think otherwise, when you move to a Live account and the risk of losing your own money becomes real, it weighs on your decision-making. Without a safety net, it’s only natural to approach things a little more cautiously.
Approach your Demo trading like you would Live Trading
Here are some handy tips, that can help you practice this live trading.
Tip #1: Pick the same type of account
Choose an account type similar to the live account you plan to trade with. Pick the same account size, leverage, currency etc. that you would trade with when you make the switch.
Tip #2: Trade how you normally would
Don’t place larger positions or open orders without looking at your charts or Market Watch board. Trade like this was actually your real money.
Tip #3: Don't trade beyond your "means"
For example, if you’re the type of trader that will only be trading small lot sizes, there’s little benefit in placing huge trades using the Demo account. All that does is create an unrealistic representation of what your Live trading experience will be.
Tip #4: Make the loss seem real
A fun suggestion from Babypips includes giving yourself minor 'punishments' for each loss. As you you don't really lose anything in a demo account, Babypips suggest doing things such as "90 second planks" or do an extra chore as a physical reminder of loss.
Ideally, you want to make the transition between a Demo and Live account as seamless as possible. And that means treating your Demo account like a tool for learning, not a toy for play.
Editors’ Picks
EUR/USD holds around 1.1750 after weak German and EU PMI data
EUR/USD maintains its range trade at around 1.1750 in European trading on Tuesday. Weaker-than-expected December PMI data from Germany and the Eurozone make it difficult for the Euro to find demand, while investors refrain from taking large USD positions ahead of key employment data.
GBP/USD climbs above 1.3400 after upbeat UK PMI data
GBP/USD gains traction and trades in positive territory above 1.3400 on Tuesday as the British Pound benefits from upbeat PMI data. Later in the day, crucial data releases from the US, including Nonfarm Payrolls, Retail Sales and PMI, could trigger the next big action in the pair.
Japanese Yen seems poised to appreciate further; awaits BoJ decision on Friday
The Japanese Yen maintains its bid tone through the first half of the European session on Tuesday which, along with a bearish US Dollar, keeps the USD/JPY pair depressed below the 155.00 psychological mark. The growing acceptance that the Bank of Japan will raise interest rates this week turns out to be a key factor behind the safe-haven JPY's outperformance.
Editors’ Picks
EUR/USD holds around 1.1750 after weak German and EU PMI data
EUR/USD maintains its range trade at around 1.1750 in European trading on Tuesday. Weaker-than-expected December PMI data from Germany and the Eurozone make it difficult for the Euro to find demand, while investors refrain from taking large USD positions ahead of key employment data.
GBP/USD climbs above 1.3400 after upbeat UK PMI data
GBP/USD gains traction and trades in positive territory above 1.3400 on Tuesday as the British Pound benefits from upbeat PMI data. Later in the day, crucial data releases from the US, including Nonfarm Payrolls, Retail Sales and PMI, could trigger the next big action in the pair.
Gold retreats from seven week highs on profit-taking; all eyes on US NFP release
Gold price loses momentum below $4,300 during the early European trading hours on Tuesday, pressured by some profit-taking and weak long liquidation from the shorter-term futures traders. Furthermore, optimism around Ukraine peace talks could weigh on the safe-haven asset like Gold.
US Nonfarm Payrolls expected to point to cooling labor market in November
The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls (NFP) data for October and November on Tuesday at 13:30 GMT. Economists expect Nonfarm Payrolls to rise by 40,000 in November. The Unemployment Rate is likely to remain unchanged at 4.4% during the same period.
NFP preview: Complex data release will determine if Fed was right to cut rates
The long wait is over, and the Bureau of Labor Statistics in the US will release nonfarm payrolls reports for both November and October at 1330 GMT on Tuesday. The overall NFP figure for October is expected to be -10k, however, it is expected to be influenced by a massive 130k drop in federal department workers.
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