Demo account is trading simulator in the foreign exchange market. They are almost identical to the real ones. Their main difference is virtual money for trading. Accordingly, all profits and losses are also virtual.
Both newbies and professionals use demo accounts. For beginners, demo trading is an opportunity to familiarize yourself with the currency market and deal with the functionality of trading platforms. While professionals check their strategies, evaluate and compare trading conditions of brokers, as well as test various indicators and advisors.
Most brokerage companies offer their clients demo accounts. The opening procedure is simple. It is necessary to fill out a form on the broker’s website, where to enter personal data and select parameters. Also, a practice account can be opened in the trading platform. Sometimes brokers set limits on their demo accounts. For example, they give access only for a certain time or fix the maximum number of open accounts.
Training accounts help to understand the financial market more deeply, to learn the behavior of specific currency pairs. With a demo account, the trader can also gain insight into the technical analysis, which will be useful in further trading.
What should you know about demo accounts?
There are some nuances that every trader should be aware of. The main difference between virtual and real trading is the psychological side. On a demo account, a trader does not feel a real risk of losing all his investments, which appears when he switches to a real account.
As a result, the wrong approach to real trading is formed. To avoid this, follow these rules:
- Keep a trading journal, analyze each transaction;
- Treat virtual money as real;
- Trade on demo account with the amount that you are going to trade on real one;
- When switching to a real account, start trading with a small amount.