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One factor that often puts people off from trying CFD trading is the idea of using real money when they aren’t entirely sure what they are doing. There is a lot of educational material out there to help you learn, but it is still a little different from traditional trading. That’s where a demo account comes in. But what can you do with one?
Why use a demo account?
A demo account is a perfect way to learn about trading without risking real money. When you set up an account, you are given a budget in virtual money to trade with. You can then start to look at the different strategies you have read about and see how they work on the account. It helps you build confidence in what you have learned and to see if there are areas you think you need to learn more about before beginning trading for real.
There are lots of different things you can do with a good demo account including:
Get to know the markets, explore them and see how they behave to start understanding which you want to trade with.
Practice opening and closing positions, so you understand how the deal tickets work.
Learn about applying stops and limits, looking at margin requirements and read profit and loss information.
Create watchlists of the types of markets or assets you want to trade with later.
See the many charts in action and become familiar with the knowledge that they provide you with.
Look at your past activity and learn from what worked and what didn’t.
Understand the differences
There are some minor differences between a real account and a demo one to remember when you come to switch.
One being that trades through a demo account aren’t typically subject to slippage, interest or dividend adjustments. Usually, there are no out of hour price movements either. Another big difference is deal rejection. There are times in real life where your trade can’t go through – the price may change just moments before your trade is executed, for example. On a demo account, the transaction always goes through.
Mindset is one of the other big considerations when using a demo account. Or more precisely, when you switch to a real account. When practising on a demo account, your mindset can slip into one where you are almost playing a game. And this is fine – if you can switch back out of that mindset on the real account. Having a gameplay mentality with real money isn’t the best approach. So, you need to learn the right mindset to a demo account to carry over to a real money one.
Practice those strategies
Demo accounts are the best possible place to learn and practice the strategies you will use in real money trading. They are the chance to see how the account reacts to what you want to do in a way that would mirror the real world. It also helps you take the strategies that you learn and apply them in new ways or even create new strategies. That way you might even get an edge over fellow traders by trying something unique and new.
You can open a GCC Investing Demo Account today – it is quick, simple and allows you to access all the benefits of a high-quality trading site, without the concern of using real money. When you are confident in what you are doing, you can then easily move to a secure real money trading account and start applying that learning.