Benefits of Using a Demo Account

Benefits of Using a Demo Account

Today demo accounts are an essential part of every broker's range of tools, but it hasn't always been like that. And by the way, what are the benefits of using a demo account?

Square App Receives Green Light for Cryptocurrency Trading in New York
Let’s Talk Business – Week 29
Did We Celebrate Too Soon? Bitcoin Extends Losses After Falling Below $8,000

Find the best trading platform. You capital is at risk when trading. Be careful.

A demo account is a replica of a live trading account with the difference being that you trade using virtual money instead of real money. This creates a risk-free environment where traders can invest under real market conditions without the risk of losing any money. Obviously, this also means that you can’t make any money, but that’s sort of the point.

How To Use a Demo Account

Demo accounts were first introduced by forex brokers to offer traders the chance of testing the broker’s services and trading platforms before signing up and depositing their own money. Typically, it’s only offered by brokers that are confident that traders will appreciate their products and sign up for a real trading account after some demo trading. However, demo accounts fill other purposes too.

One of the main benefits of using a demo account is that it allows traders to practice trading and limit losses. By trading without risk, traders can master the skills needed to succeed before they actually start trading. It gives traders an edge against the market and provides a more fair environment.

Additionally, demo accounts are beneficial for experienced traders as well. Most professional day traders spend a lot of time developing and testing investment strategies, and as you might imagine, it can be a costly affair, unless, of course, you use a demo account.

Different Types of Demo Accounts

Since there are different trading platforms, there are also different kinds of demo accounts, but generally speaking, they function in the same way. You open a free account and get credited a predetermined amount of virtual money from the broker. Sometimes you’re limited to the amount that was credited to you, but in most cases the demo accounts are unlimited, meaning you can get more virtual funds when needed.

One of the most common and popular demo accounts is the MetaTrader 4 demo account since the MT4 is the most popular trading platform out there. There is also a MetaTrader 5 demo account, and brokers that have developed their own platforms usually have their own demo accounts.

Below is a list of regulated CFD brokers that offer demo accounts in one way or the other. Click the links to be redirected to our detailed reviews where you can find more information about the brokers.

For even more examples of brokers with demo accounts, we will refer you to our list of licensed brokers.

Risks of Using Demo Accounts

Believe it or not but there is a small risk for increased losses using demo accounts. Luckily enough, it’s easy to avoid. Humans have a tendency to take larger risks and act irresponsibly when trading using fake money. The problem is that some people keep those tendencies when switching from a demo account to a live trading account.

The best way to avoid this is to practice common sense and to always be very careful after periods of demo trading. 

Find the best trading platform. You capital is at risk when trading. Be careful.