In trading, in addition to the opportunity to obtain high benefits at very low costs, one of the main advantages is the availability of tools that allow anyone to learn how to invest without putting their own capital at risk from the start. These tools are called demo accounts.
In this article we are going to explain how to properly use demo accounts to learn how to trade in the markets before using a real account and risking our money.
What are demo accounts?
A demo account is a type of trading account, offered by most online brokers:
It is used to test the broker’s trading platform and make simulated transactions with the same trading conditions (in theory) as in a real account but with virtual money, that is, without putting your capital at risk. Both profits and losses in a demo account are applied to a virtual balance that you have available since the account is opened.
The demo account in trading also represents the most advisable way to learn to invest since you can use it to analyze the market and build your trading strategy. Through the tests you make in demo you can develop your own trading system to make it profitable, learning from mistakes and successes, without putting your money into play.
A frequent mistake of many traders is to start trading directly with an account with real money or start with the demo account but move quickly to the real one without practicing enough. This will cause the trader to be unclear about how and when to trade and this can lead to a dangerous confusion.
Something you must understand from the beginning is that trading is not a game of chance. It is not about “guessing” by intuition in which direction the market is going to move but it requires training, experience, discipline and effort. With a demo account you will not risk your money from the first moment but you will have to invest your time and be patient. If you are willing to work to become a profitable trader then we will see what is the right way to learn to invest with a demo account.
What is the proper way to trade in a demo account?
Based on our experience, these are the 3 main factors to learn how to trade correctly through a demo account:
Take the demo account as if it were a real account
The most important recommendation for anyone to learn how to trade correctly with a demo account is to take all trades performed with this account as if they were transactions carried out in a real trading account. Try to forget that the balance of the demo account is virtual and that nothing happens if you lose it. Therefore, if you don’t want to lose your money in a real account, try not to lose it in a demo account.
Perform uncontrolled trades, take too many risks, open positions without trying to build and debug your own trading strategy, stop analyzing what works and what does not, … are the most common mistakes that can end the balance of your demo account quickly. Not only that, if the trader does not use his demo account seriously, then he will only waste his time without learning anything and create bad habits that he can repeat in a real account.
Acting with discipline is key. Try to act as if it were your real money that was in irrigation since this will help you make your decisions more cautiously. While you still do not have the knowledge, the necessary experience and a strategy that has given you a good result, it is always preferable that you try to learn and not “burst” the demo account, so as not to try to achieve great results without knowing how and most likely assuming A very high risk.
The following is a list of brokers offering demo accounts: