Broker to Trading

A demo account allows the trader to use the platforms and features of the provider without making a deposit. Demo accounts will have virtual funds included and also allow the trader to practice trading even after they have opened a live account. What is best can depend on a wide range of factors; however, an attempt to simplify by looking at what a demo account can do and then exploring broad categories of Forex trading will be followed here.

A demo account can be opened at a provider either as a separate account or as part of the account opening process or afterwards. That is, the trader may apply for a demo account as a separate application, but in some cases may be given access to the platform after initial sign-up as a demo account.

A demo account does not contain real money; it does contain virtual funds, which cannot be withdrawn. They are there simply to be traded with, to simulate the experience of trading on a live account (demo accounts are sometimes called 'trade simulators'). This has a potential downside, in that the virtual funds are normally relatively substantial and may be significantly more than the amount the trader will deposit to the live account. Why this matters is that a well-funded account might be traded on differently than an account that is funded with much less real capital.

When properly managed, a more sizeable account allows greater room for retracements, which is a common and repeated experience of Forex and other leveraged trading, that is, the trade moves against the traded position.

While a loss or gain is not realised in an account until the position is closed, as a loss mounts, it can trigger a limit set by the trader or by the account (for example, a stop-out). So, how much room there is in terms of the value of the positions versus the account size, and how much this can change, can be a critical factor when trading.

A larger account, therefore, might be traded differently than a smaller account, and this may not be apparent until a live account is used. One way to tackle this issue is to start with small trade sizes on a live account. Also, the fact that the funds are not real may have an effect on the level of risk taken.

This said, it is normally worthwhile to use a demo account initially. It will provide experience with using the platform and with the mechanics of making a trade and offer a platform for actually placing trades, utilising the tools available, for example, using a news feed or economic calendar for fundamental analysis or trading on a technical basis with indicators, trend lines, and graphical objects.

As well as offering a way to practice trading, a demo account can provide a way for the trader to try different types of Forex providers and find one aligned with their interests. A selection of providers with different types of features is chosen to provide a choice for a demo account and point the way to the best fit.

These categories are, firstly, Automated Trading Provider, for those seeking a provider with a focus on automated trading. The automated trading features can be tried and tested on a demo account. Secondly, Small Trade Sizes, for those who want to try a demo at a provider that offers accounts with small minimum trade sizes. Thirdly, Wide Range Of Features, for those who may have interests in the wide range of ways Forex is traded.