Pros and Cons of Demo Trading

by Zack on August 31, 2017

Demo Trading

The forex market has become available to retail traders in the past few years as online forex brokers have set up shop and individuals have increasing access to the Internet. Forex traders can now use online trading platforms to access huge forex markets, even when they are trading small amounts as individuals. Many of these online trading platforms offer demo accounts so that traders can gain a hands-on experience of what it is like to trade in the market. These are generally offered free of charge and have many benefits, although there may be some disadvantages to demo trading as well. Here we will look at some of the pros and cons.

Pros

Free

A demo account is offered for free so there is no money outlay for using it. This makes it possible to trial a few different brokers to find the one that will best meet your needs and which you find the most convenient to use, all at no cost to you.

Access to Broker Services and Customer Support Staff

This will provide a true feel of how it will be to work with the broker when you open a real money account.

Try Out Forex Trading

If you are new to forex trading, it is worthwhile to try it out to see if it suits your temperament and if you are suited to the life of a forex trader. All people are different and just because forex trading works for some people, does not mean it will be right for you.

Improve Your Strategy with No Risk

Demo trading allows you to trade in the market, like real time trading, but without the risk to your finances. This means that you can try out your strategy and then work on it to perfect it, saving your real money trades for when your strategy is working well. Don’t pay for beginner’s mistakes when you can make them in a demo account.

Cons

Supplying Personal Details

You may be required to provide personal details (name, address and contact information) in order to open a demo account. Many people do not feel comfortable with providing this information, although it may be possible to supply fictitious information and still be able to open the account.

Does Not Take Emotions into Account

While practicing your strategies in the demo mode can be helpful in perfecting your strategy, it does not take emotions into account. It is much easier to stick to your strategy and your set limits when you have nothing to lose, like when you are placing trades with virtual money and only risk losing virtual money. In other words, practicing in the demo mode does not mean you will perform as well with real money when your emotions may cloud your judgement and impact your trades.

Conclusion

While there are both pros and cons to demo trading, most new traders feel that the pros outweigh the cons and make the most of using the demo accounts on trading platforms to improve their strategy.

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