You’ve probably readied yourself with theories, tips, and strategies on how it is to trade stocks and CFDs or contracts for difference. Are you ready to trade live? If you’re one of the many raring to try their hands on trading online, perhaps you are committing a mistake by risking your trading account without even so much as a practice of your trading skills. Have you considered a demo trading account? If you answered “Yes”, then you’re on the right track. And if it’s a “No”, don’t worry. You can still take a breather and save yourself unnecessary losses.
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Demo Trading Account vs. Broker Demo: What’s the Difference?
When you see the word “demo”, first you have to find out what it means and how it is used by a broker. It may simply be just a basic preview which may only have minimal benefits to you especially if you’re a beginner. The thing is, there are platforms that associate the word ‘demo’ with tutorials and this might confuse you.
We can’t emphasize enough: Dig deeper before you deposit your money. Try to click on the link that says demo and see if it indeed brings you to a demo account creation page. If it gives you a link to a video tutorial or a broker demo, time to look for another broker elsewhere. Basically, what they are trying to provide you are just simple learning materials or resources and not the demo account that we’re talking about.
A demo account should offer the use of virtual currency or funds. This is what you should look for. Virtual trading will allow you to trade within a simulated trading environment and open trade positions where you can practice strategies and enhance your trading skills.
Is there a need to use a demo account before trading live?
The obvious answer is a big resounding “Yes!” You should take it upon yourselves to get a feel of how it is to trade, even if only through practice. This way, the platform features can be tested out and you learn your way around the user interface. It’s like giving a car a test drive before you decide to purchase a car but in this case, you’re testing the platform without the need to commit any amount.
Here are some points why creating a demo account will help you get an understanding of how you can profit easily:
Trading Methods Tested in Real-Time. You can still avail of full site features even if it’s only a demo trading account. Asset prices, expiry times, and news feeds are provided in real-time, which you can use as if you were in an actual trading environment. Here you can experience market volatility, which will challenge you to tap into your trading techniques. Do take note that some brokerages offer free practice accounts that don’t have real-time market prices. It’s not recommended to use this kind of account that is not using live quotes because it doesn’t simulate real market conditions. The good news is that reliable brokerages usually don’t do this and will utilize live prices even in demo mode.
Handling Emotions. Trading is full of surprises and how you handle your emotions can greatly impact the outcome of your trades. This is also the best place to get to know how well you react or behave badly in the most challenging market situations. And even if you behave badly, you’ll be able to make adjustments or improvements to your behavior without using your real funds. Getting yourself used to the platform will allow you to understand certain situations better so you can become a wiser investor and won’t let your emotions control your trading decisions.
Broker Dry Run. Aside from trying out what your broker promises, you can also test a broker’s commitment by initiating contact with customer service and see up to what extent they are willing to help you. Good service can be equated to professionalism, how well your concerns are handled reflects the reliability of a broker. You can also ask them to add more demo money into your practice account in case you run out of virtual funds.