Demo Account
Demo Account is offered for practicing trading strategies. Also referred as Paper Trading Account for testing new strategies without any risk of losing actual money. Funded with virtual money enabling customer to practice. One use of account is teaching students about basic concepts and strategies of investing in stock market. It is a perfect account for you to polish your skills by learning the fundamentals of forex trading and your platform also the markets trends. Why choose a demo account to trade?
Trading forex virtually remove the psychological risk factor that is involved in making or breaking the trader in this market. You cannot say that it will help you overcome all of your fears but it will help you get enough confidence to enter the real forex trading market. Here you can use it to analyze your old strategies, and then analyze other trader’s strategies and in the end use, both of them to build your own and test that in the demo account.
Benefits of a Forex Demo Account
The benefits of holding the account not just ends with assisting beginners but also for good practice in long run. Here are key advantages of having forex demo account.
Practice Trading
Most prominent of all is use for practice to get familiar with trading conditions. Almost all of the brokers offer same type of feed in the demo account that are in live account. It helps to overcome the markets risk you can face in real account.
Test your Trading Strategies
Forex demo account should be your first step if you have placed your first step in forex trading. It helps to test and tweak your strategies within safe and risk free environment.
Risk Management
Demo account helps you to minimum your risk factors because you are trading under real market conditions. Factors like, how many positions to open up the trade, how many units or lot sizes to trade. There comes a point where risk management in terms of position sizing becomes your second nature, here you are confident enough to move in your live environment.
Platform Awareness
Demo account helps you to learn your platform easily without any fear of loss. You can have a brief structure review of your platform.
Tackle Market Trends
Demo account helps to you get in the flow with the market trends and tackle the difficulties that you will face in the live environment.
Best Forex Demo Accounts
When it comes to forex trading. The point of choosing the best broker does not imply on real account but for demo account also. If you are planning to get a demo account, you must ask the following question from your broker:
- How long does the account last? It directly imply the timespan you can invest in polishing your skills in the forex trading.
- How big the account is? Big account here means the features available in the demo account. More features means more practice on the account.
- Are all Platform features available? Some platforms have disabled some features for the demo trading account. You must make sure first that all of the features that are available in the live trading environment are available in the demo account.
I have listed some of the best demo accounts with their key features.
- AvaTrade
- easyMarkets
- Plus500
- FxPro
- HotForex
AvaTrade
When it comes from the perspective of virtual funding amount, you can consider it best for opening demo account. AvaTrade offers you a sum of $100,000 for the initial fund of your demo account. When it comes to trading platform, it is also provide you a variety to select from depending upon your needs.
easyMarkets
If you are not familiar with the trading platforms and are a newbie and do not want to get indulge with complexities of trading platforms. Here comes easyMarkets, It comes with a user-friendly trading platform interface. Its versions are available for mobile, tablet and desktop.
Plus500
Many traders have fear of time limit for the demo trading account. Apart from that, you have platforms that provide only limited features but better time limit or vice versa. Here enters Plus500, it is a top CFD brokers which provides 1,000 plus assets for trading. Plus500 does not accepts US clients. It also comes with an initiative interface that is easy to use for both expert and novice users. The main feature that we missed is unlimited demo trading time, which makes it ideal for tracking long performance records.
FxPro
It is a global award-winning broker. FxPro supports MT4 and MT5 trading platforms considered as best platform for forex trading. FxPro supports MT4 floating accounts with instant and market execution. You can practice the same strategies in you demo account and then can implement on the real environment.
HotForex
Hotforex give you the feature of Islamic account. You can plan, build and deploy your trading strategies on demo account by analyzing the traders using Islamic account and you can use the same strategies on your live Islamic account.
Downsides of Demo Account
You have seen that traders that were trading successfully in demo account when they move to the live environment, they fail with succession of loss. Here are some key points that will tell you why this happen.
Early Bidding
When you are using demo account, you get early fills why bidding or offering. While subject to live environment, bidding happens through queues that may results in Slippage. Current Bid price will not ensure that you will get that bid as there could be only few shares or contracts filled by that price.
More Capital
In demo account, you often have more capital than what you will invest in the live account. More capital allows small losses, easily restored but a loss on a smaller account is harder to recover. The instruments and the volume in the demo account trade may not be replicate with the live account.
Emotions of Fear and Hope
Fear of losing the capital can break your confidence in the trading system and stops the trader from implementing the strategies properly. Greed in way that you hope that a losing position can become profitable and you invest more this happens again in the same result. It is far away from the impacts on the life of a person that he faces after the real trading.
False Confidence
Demo account may be responsible for creating false confidence in you. Trader have no risk regarding investing money on the trading. Hence, the successful trade with bigger initial funds will build over confidence in them and will lead to recklessness in real trading. They should keep in mind that approximately 80% of traders in forex trading can result in loss due to unstable currency pairs.
Overcome Downsides
Here a question raises. How to make demo trading a realistic approach? Here I will discuss few points that can help you to minimize the downsides discussed above.
- When you place market order, make a difference on one-cent slippage on high volume stocks. Also, consider small volume or volatile stocks to have larger slippage.
- Always trade with a moderate amount of capital in the demo account. Try to use the same amount that you would use in your live account.
- Make a feel in mind that money you are using is real. This will help you overcome the unseen fears of live account and polish your skills.
- If your order is dilled in just one tick. Assume that your order not filled as this is a demo account and in real account where you are facing real market, this may not happen. Remove the profits or losses from these trades from the net profit or loss shown on the simulator as if the trade never existed.