Learn Pros & Cons of Trading on Demo Account
In this article, we will discuss demo account trading.
We will discuss its importance for newbie traders and its flaws.
Demo account is the best tool to get familiar with the financial markets. It gives you instant access to hundreds of different financial instruments.
With a demo account, you can learn how the trading terminal works. You can execute the trading orders freely and get familiar with its types. You can get acquainted with leverage, spreads and volatility.
Trading on paper money, you do not incur any risks, while you can see the real impact of your actions on your account balance.
Demo account is the best instrument for developing and testing a trading strategy, not risking any penny.
The absence of risk makes demo trading absolutely stress-free.
The incurred losses have no real impact, not causing real emotions and pressure, which you always experience trading on a real account.
Your performance (positive or negative) does not influence your future decisions.
Real market conditions are tougher. Demo accounts execute the orders a bit differently than the real ones. That is clearly felt during the moments of high volatility, with the order slippage occurring less often and trade execution being longer.
Trading with paper money allows you to trade with the sums being unaffordable in a real life, misrepresenting your real potential gains and providing a false confidence in success.
Even though we spotted multiple negative elements of demo trading, I want you to realize that it still remains the essential part of your trading journey and one of the main training tools. You should spend as much time on demo trading as you need to build confidence in your actions, only then you can gradually switch to real account trading.