Many trading platforms offer two categories of trading accounts: the live account and the demo account. A demo account allows you practise trading without risking your capital. Novice traders prefer to trade using the demo account before moving on to the live one.
Demo accounts are therefore important as they allow you to practice your skills without risking your money. Also, a demo account on https://www.equiti.com/accounts/compare-our-accounts/ allows you to test various strategies.
Benefits of Using a Demo Account
Beginners enjoy a plethora of benefits from using a demo account. Some of these benefits include the following:
1. It Allows You to Practise Some Basic Trading Skills
Trading requires some skill if one is to make profits. A demo account gives you the chance to practice the essential skills you will need to trade successfully. This way, you can avoid typical trading mistakes novice traders make.
2. Decide the Trading Assets That Suit You Best
This calls for some serious research and dedication. You need to examine every instrument concerning the following:
- How volatile the instrument is
- The historical value of the instrument
If you are invested in trading and want to make a success of it, then you must take time to study your instruments of choice. This way, you are likely to find a strategy that works for you in the long run.
3. Learn Different Trading Strategies
A demo account is an ingenious way to learn and practise several trading strategies. Trying out different strategies helps you to figure out which one works best for you. Even competent traders turn to the demo account occasionally to practise a few strategies before hitting the market in earnest.
4. Learn the Best Time to Open a Position
With time and experience, you learn that prices can move in a matter of hours or days. Practising with a demo account helps you learn the best times to open your positions. Naturally, this comes in handy when you graduate to the live account as you will avoid floundering.
5. Disadvantages of Using the Demo Account
Many experienced investors say that the demo account comes with one specific disadvantage – it does not give the trader the full experience of trading with real money. This includes the high and the lows, as well as the excitement and anxiety that accompany trading.
For instance, you cannot gauge your emotional state using a demo account. You know there is no risk of loss as you are not using real money.
All in all, the significance of a demo account is not to be underestimated. It is a great space for rookie traders to learn skills and try different strategies out. However, how you approach it matters a lot. The best way is to treat it as if it were a real account.
This means that you will not play around with large deposits because you know there is no risk involved. You will not get the feel of the live account by doing this. You want to train yourself to refrain from risking too much.
A demo account also trains you to create a plan that you can stick to. You can track your progress and see if you meet your trading objectives. If it proves to be successful, you can move it to the live account.
It is best to open your demo account with the trading platform you have chosen. MetaTrader offers great services with the demo accounts and you can seamlessly move with your broker to the live one.
Also, once you graduate to your real account, you will not have to learn unfamiliar software from the start. You will be able to carry on trading without interruptions.
Ultimately, a demo account helps you to put in some practice to prepare for your live account. It helps you to figure out which strategies are the best for you and also get a feel of trading before you dive in.