Online trading demo accounts are just that, accounts that online trading platforms offer customers to allow them to experiment with their particular trading platform.
Investors of old wishing to practice trading used to have to write their investments on pieces of paper and follow along with the markets as best they could. Over the years paper trading has evolved digitally, allowing investors to practice trading stocks without having to put any actual money in the danger zone.
A demo trading account uses monopoly money to enable prospective traders to practice trading through a platform; to learn how its various features work and to see whether the online trading platform is compatible with their needs and how they like to invest, before they have to invest actual money.
Practice online trading makes perfect
Most online trading platforms, such as stock, forex and commodities trading platforms now offer demo accounts to potential users. Because whilst most people have an understanding of how online trading works, for example, trading forex, it isn’t as simple as one might think.
Anyone who’s ever gone on holiday and purchased foreign currency prior to travelling, and then sold it back to the agent at the airport in exchange for regular cash, has had a go at forex trading. You hope when you buy your foreign currency your money is strong and the foreign currency is weak, so you get more bang for your buck. And when you exchange it back you hope the reverse is true.
But trading forex online isn’t quite as straightforward as that, what with spread betting, contracts for difference (CFDs), deposits and offer prices to take into account, all of which could affect how you choose to trade on said forex platform.
The way to get ahead, therefore, is to practice trading before you have to do it for real, with cold, hard cash. Enter demo accounts.
You get to practice with all of these different trading options in real time (using fake money), taking into account a wide range of variables, all the while learning the best approach to trading, before you have to commit any actual money.
The benefits of online trading demo accounts to new traders
- You get to practice trading online in a simulated live market
- You can learn the intricacies of each platform, getting to know the technology before you have to start worrying about real money
- You get to access real time market data, trading signals and forex news whilst practicing trading
- There is no financial consequences for you should you make a mistake
- Traders can practice their trading strategies to check their viability, letting them see how the trades might perform in real life
Learn to trade using online trading demo accounts
If you’ve never traded online before, learning the craft before putting your cash upfront is the only sensible option.
You can learn how the markets work, as well as when the best time to enter the market (and exit it) is. By setting goals and targets you can learn how to meet these, and when to exit each investment, as well as getting a better understanding of how much you’re prepared to lose on a specific investment, should the market take a downturn.
Demo trading accounts essentially let you look back at your trading actions and assess how you did, what you could have done better/differently and allow you to learn from your mistakes without it costing you a penny.