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
AUD/USD remained bid above 0.6500
AUD/USD extended further its bullish performance, advancing for the fourth session in a row on Thursday, although a sustainable breakout of the key 200-day SMA at 0.6526 still remain elusive.
EUR/USD faces a minor resistance near at 1.0750
EUR/USD quickly left behind Wednesday’s small downtick and resumed its uptrend north of 1.0700 the figure, always on the back of the persistent sell-off in the US Dollar ahead of key PCE data on Friday.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.
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