Guide to Understand Demo Accounts

Demo Accounts are offered here at BlackBull Markets, it is a great tool for all traders to utilise. This article is designed to assist your understanding of Demo Accounts and how to best utilise this wonderful tool.

 

Demo Accounts are funded with simulated money, they allow you to experience trading under real market conditions. Demo Accounts are a great tool for you to become accustomed to the functions of your broker’s trading platform, such as:

 

►How to set stop order?

►How to place a limit order?

►How to place a stop loss?

►What is the spread?

►What is the lot size that can be traded?

 

Being accustom to the platform significantly reduce the potential trading errors (for example, enter at the wrong price, failure to implement stop loss) when switching to a live account. Additionally, it provides a way for you to test and refine different trading strategies. However, if you want to fully utilise the Demo Account, treat it as a “real” account where you treat each trade as if it was using your own money.

 

 

The Disadvantage of Demo Accounts?

 

Although Demo Accounts simulates real trading conditions, the effect of making and losing money on a Live Account could differ significantly. Basically, Demo Accounts eliminates most of the psychological elements involved in trading as the monetary aspects of a trade is taken away. When trading live, you have a real connection to every profit or loss you make. Profits could make you overconfident, and losses could discourage your future trading attempts. Knowing how to cope with making and losing money will significantly boost your trading strategy.

 

However, it is good to remember if you’re ever discouraged from a string of losses, Demo trading could be a productive way to regain your trading confidence and refine your trading strategy.

 

One other possible disadvantage is that Demo Accounts are set to instantly execute any orders placed by the user, which means trader’s strategies are never filled as they would in a live environment. Trader’s strategies, especially for EA traders, should always be tested in a live environment to gauge full performance statistics.

 

 

What are the steps I should take?

 

One possible pathway you could take is:

 

1) Start with the demo account, understand the functions of the platform and develop your own strategy (that fits you).

2) Get a real account with a small size just to understand the trader’s psychology and knowing the feeling of having something to lose.

3) As you become more confident with your trading, you can choose to scale up the size, if not then can go back to demo to refine your strategy.

 

However, you must understand that everyone is different, the way they perceive trading. This is not the only steps you could undertake in your trading career. These steps to allow you to understand the platform, develop and refine your strategy, understand risk management and trader’s psychology, and scale up once you feel comfortable.

 


This information is subject to change without notice. BlackBull Markets strives to provide the most accurate information available, but cannot guarantee that any of these events will occur nor that the outcome will be as stated. This information is to be used for educational purposes only and further research should be done before trading.

BlackBull Markets is the trade name of Black Bull Group Limited Ltd which is a registered Financial Service Provider in New Zealand with FSP No. 403326. Black Bull Group Limited registered New Zealand Company is listed on New Zealand Financial Service Provider Register (#FSP 403326) and is also a member of the Financial Dispute Resolution Service FSCL.

Risk Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and, therefore, you should not invest money you cannot afford to lose. You should make yourself aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any questions or concerns as to how a loss would affect your lifestyle.

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