In today’s digitised world, the world’s largest financial market is about as accessible as the news or your social media messages. Online brokers and platforms put the world’s market at your fingertips and anybody can become a trader at the push of a button.

Most brokers who offer platforms like MT4 and MT5 from MetaQuotes will offer a free forex practice account, commonly referred to as a demo account, as a way of letting you practice trading in an environment that mimics real trading conditions without carrying any actual monetary risk.

Brokers like TIOmarkets offer demo accounts free of charge, and traders can choose how much in virtual funds to add to their practice account.

Practice-trading on a demo account has a lot of benefits, but can also have a few pitfalls when it comes to moving from a demo to putting your hard-earned cash at risk to make real returns.

Let’s explore some of the most notable pros and cons of trading demos.

Pros of Forex Demo Trading

Beginner and advanced traders both routinely use demo accounts to practice trading the forex markets.

Some of the most common advantages of demo trading include:

Learn If Trading Currencies Is Right For You

If you’re brand-new to forex trading, you’ll generally want to start practicing on a demo account to get a sense of whether you’re suited to the wild world of the currency markets. Everyone is different, and some people are simply more suited to the risk, returns and emotions involved with online trading than others.

Dipping your toe into the water with a demo account is the easiest way to get a sense of whether your lifestyle, temperament and personality are suited to the task.

Make Free Mistakes

It’s only natural that every budding investor wants to know if they have a chance at making a return before putting actual money at risk. A demo account lets you practice in an environment that very-closely resembles the cutthroat world of forex trading. As a novice, this means you can make rookie errors without suffering the consequences out of your own pocket. You’ll get the chance to learn from your mistakes, turn it around and make a consistent profit without “learning on the job”.

Practice Risk Management

Trading’s worst-kept secret is that to enjoy sustained success as a trader, it’s essential to establish good risk-management and money-management techniques. A demo account will let you put the principles you’ll learn into practice, watch how they work (or fail) and make improvements so that you can see for yourself how risk-management affects your balance.

A common piece of advice for new traders is to start off by ignoring every principle of risk management you may have come across. Then, gradually introduce these principles into your trading to see how the benefits accrue in your virtual funds over time.

Test Trading Strategies

New and experienced traders alike will want to test the trading strategies they learn on a demo account before trying to implement it in real life. This lets you become accustomed to following the rules of the strategy, work out any potential flaws before it costs you money, and turn it into a profitable system before using it on your live account. 

Learn The Platform

This is particularly important for new traders. The demo account offers a stress-free method for learning your way around the platform. There are few worse feelings than in being in the middle of a crucial trade, only to find out you don’t know how to take necessary action like closing your trade, opening a new trade or adjusting your risk. The demo account lets you learn where every tool is, how to access it, and how to avoid making mistakes, like pressing a button that you thought did something other than what it actually does.

Cons of Demo Trading

Although there are considerable advantages to using a demo account to cut your teeth in the world of forex, there may be some pitfalls that you’ll notice when it comes to making the switch over to a live account. 

Being aware of some of the common cons of the demo account will help you better manage the transition.

Overtrading

Many people fall in love with trading at first sight. Even in the virtual world, opening and closing trades and watching your virtual balance rise and fall can be quite a thrill. In the real world however, it’s often best to do nothing, either because the market isn’t ripe for trading, or because the rules of your strategy don’t permit you to take any current action.

By starting off on a demo account, you might find it hard to break the habit of pulling the trading trigger whenever possible. 

Is this real life, is this just fantasy? Who cares! Because there’s no risk involved, you can overindulge in your new found passion to a degree that’s not realistic, at least not if you want to make a profit. This can ultimately lead to real financial loss if you’re not able to temper that urge when you go live. At first, by all means, go crazy – but then restrict yourself to only the trading you would allow yourself with real funds.

Emotions Aren’t Quite The Same

A big part of earning money through trading involves learning how to keep your emotions in check. Greed, fear, and the urge to chase a loss has been the ruin of many a trader. 

The truth is, you shouldn’t expect to learn how to handle this aspect of trading solely from a demo account. It’s just not the same. Your emotional response when trading in a demo account might be to shrug off a loss (which incidentally is often the correct approach), but when real money is on the line, you may find yourself in a sudden frenzy.

You’ll only truly learn what you’re made of, and how to improve your emotional response, when it matters most.

Bad Habits Don’t Have Consequences
You’ve all heard the phrase “practice makes perfect”. But does it really? Does the stage actor learn more in rehearsals or in front of a live audience, when the entire production depends on them? Does the athlete learn more on the training ground or in the arena, when everything is on the line? 

If all you do is practice, your mistakes don’t cost you as much, your success doesn’t matter as much, and inevitably you won’t learn as much about how to make it on the big stage. For that, you’ll ultimately need the big stage itself. 

To Wrap Things Up

Whether you’re just learning the ropes of forex trading, exploring brokers, or trying to optimise a new strategy you’ve recently learned, forex demo trading can be a helpful way of providing a safe, trading playground for you to have fun and learn in while gearing up for the real objective of turning that time and energy into precious capital.

Of course, try to avoid the pitfalls we’ve mentioned above, like developing a trigger-happy trading finger or creating unrealistic expectations. But overall, demo trading is one of the most useful tools in the arsenal of new and experienced traders alike.

At TIOmarkets, we offer a free demo account to all registered users, with no deposit required. In our MT4 and MT5 environments, you’ll also be able to try some of our unique risk management tools, such as TIOshield, which lets you cancel any trade within 60 minutes to recoup your investment.

Register here to sign up for a TIOmarkets demo account and begin trading with virtual funds.


Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Never deposit more than you are prepared to lose. Professional client’s losses can exceed their deposit. Please see our risk warning policy and seek independent professional advice if you do not fully understand. This information is not directed or intended for distribution to or use by residents of certain countries/jurisdictions including, but not limited to, USA & OFAC. The Company holds the right to alter the aforementioned list of countries at its own discretion.

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