As a beginner trader, it is important to learn how to trade after receiving the trading education and one of the ways to get that practical approach to trading is by using a demo trading account.
This is an account that the broker offers the account but the cash deposited into it is virtual money, so the trader can trade with the cash, but they cannot withdraw the profits.
The best approach when trading using the demo trading account is personalized the account to make it feel as though it is real money you are trading with otherwise there is a high chance that you will end up not taking the learning process seriously.
About Demo Trading Accounts
Demo trading accounts are very important when you are starting up; they give you that feel of being part of the financial markets, and they introduce you to the markets as it is.
Although there are slight differences between the demo trading accounts and the real accounts, you will always have that virtual stance hanging above your head as a trader honing their skill on a demo trading account.
Before demo trading accounts came along there was paper trading and that was a lot more cumbersome but it was more engaging than trading on a demo trading account.
The traders had to write the prices make calculations by hand, and that style of learning became more engaging, and the learning process was shortened.
Brokers from around the world have been providing the demo trading accounts to their clients in order to give the clients a simulated environment where they can practice their trading strategies, and they can get acquainted with the trading platform.
It is key to understand that the demo trading account should be used for learning purposes only and that way you can be able to gauge your readiness for trading with live funds.
Also while trading on a demo account it is important to note your psychology too, how often do you deviate from your strategy, do you tend to repeat a certain behavior that causes you to deviate from your strategy and is you improving or deteriorating.
All these aspects can be checked when trading on a demo trading account and when you correct them or reduce the frequency of these mistakes happening you are on the road to becoming a profitable trader.
There are a number of brokerage firms in the United Kingdom that offer the best demo trading accounts; these brokers have been building their reputation, and they have acquired a very strong backing from their clients and their peers.
Brokers like FxPro, Admiral Markets, ETX Capital, IC markets, FXCM, Pepperstone, and IG Markets offer the best demo trading accounts in the UK, and they also have trading platforms that can share the client's results with a third party to track the trader’s performance over time.
Most brokers from other countries also offer a demo trading account, but that does not make them the best providers for the demo trading account.
Characteristics of a Demo Trading Account
The demo trading account offers almost all the features of a live account but with some limitations. The demo trading account does not have a withdrawal option, and that is actually the main difference with the live account.
The demo trading account has another key difference compared to the live trading account, with the demo trading account the client is allowed to choose the amount of trading capital they want to start with, but with live funds, you can only deposit the amount that you can afford to lose.
That is where many beginner traders fail; they start off with demo trading accounts loaded with tens of thousands of pounds, but when they shift to trading live funds, they start off with a few hundred pounds.
This will definitely hurt your psyche especially if you were super successful with your demo trading account. You need to start with an amount that is reasonable in the sense that you are aiming to start off trading live funds with a similar amount.
The other feature with the demo trading account is that you get to trade the markets as long as the markets are open, that is 24 hours a day 5 days a week.
The demo trading accounts may have more instruments to trade than those offered on the live account, and that is why you should mostly focus on the assets that are available both on the live account and on the demo account.
The demo trading account has another advantage over the live account, with the execution on demo trading accounts it happens quite fast without slippages, and that may be true with some live accounts, but some will sometimes have a slippage.
This may come as a surprise to others, but the demo trading accounts simulate a perfect market environment rather it should simulate the normal market conditions.
Things to Have in Mind While Using a Demo Trading Account in the UK
When trading using a demo account, you should be realistic; this can be done only if you make assumptions as you trade.
When you place the order to buy or sell on a demo trading account, and you get filled directly, assume your price was not filled immediately maybe after a tick or two.
This will help you accommodate the lag when you start trading a live account. Also when trading using a demo trading account start off with a modest amount of capital, do not go all out with a big amount and start your live trading account with a small amount.
Also get involved at a personal level with your trading account, when you stick to your trading plan award yourself and when you fail to punish yourself.
This will improve your trading performance and get you ready for your live trading journey.