Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.
The Ultimate Guide to
Finding the Best Forex Demo Accounts For You
A Demo account is an online trading practice account which allows would-be traders to familiarise themselves with a particular trading platform and its features in a simulated environment.
In the past this was done by keeping a paper trail of hypothetical trades, this is where the term “Paper trading” comes from. Paper trading refers to the practice of trading in a simulated environment without risking actual money.
Many brokers offer free demo accounts and they can be a useful way for traders to test a broker to see if a particular platform is suitable for their trading needs.
Advantages of a Forex Demo Account
1. For traders looking for a new broker, signing up for a demo account can be a quick and risk-free method to test if the broker’s trading platform fulfills the requirements you have before opening a real-money account. Likewise, traders who have never used a trading platform to trade real money can use the demo account to provide a base to kick start their trading career.
2. A demo account can be used to develop, test and optimise trading strategies and robots. From the performances seen on a demo account, the trader can improve their own trading strategies or use an expert advisor which will eventually be used to trade a real money account.
3. A forex demo trading account can help traders get to know the relevant trading environment or trading platform. Getting the most out of a trading platform can involve studying and using the platform to better understand all the features, functions and shortcut keys that are used in the trading process. It also helps to be familiar with charts, indicators and other trading analytical systems in the trade environment before you start trading for real.
Disadvantages of a Forex Demo Account
1. One of the major disadvantages of using a demo account is that it is not a real deal. The money used for trading is not real, the conditions are not real, and therefore the entire demo trade is detached from reality. For example, a demo trade can lack the emotional roller coaster or surges of adrenaline a trader experiences when trading with real money. Because of this, some traders will use a micro account to open a small trading account to minimise the risks but still experience a real trading environment.
2. When a trader knows that real money is not at stake, there may be a level of complacency when using a demo account to practice trading. They, therefore, may end up taking bigger risks and gambles they may otherwise not make in a real-money environment, skewing the results that they receive from the demo account.
3. Another disadvantage with demo accounts is that some of the elements of real-money trading are missing. For example, traders may not get to see the impact of certain factors while trading, such as slippage, lag time and latency, and therefore it may not be 100% reflective of a broker’s real-money trading platform.
Demo Account Alternatives
One alternative to demo accounts is to open a micro account, fund it with real money and use it to simulate real trading. Opening an account with a smaller deposit size helps to lower the associated risk and is a good low-cost method of getting introduced into the world of real money trading.
For instance, if a trader wants to commence full-scale trading with £2,000, opening a demo account with a default amount of £100,000 will not provide them with a realistic experience. It can be much more difficult to practice essential skills like money management on such accounts.
However, if you open a micro account with a small deposit and use micro lots for trading, not only would you be trading under real market conditions, but you will also get to see how extraneous factors such as slippage, retracements, surprise news, etc., actually affect trade outcomes.
Demo Accounts and Trading Psychology
Trading is a mentally challenging event and a lot of it has to do with the psychology behind it. While difficult, it’s essential for a trader to take control of their emotions and develop a strong mental attitude towards trading. This is why a demo account can be useful tool for building experience and improving investment habits. This can then be further reinforced by the adoption of risk management techniques.
Demo Accounts and Account Size Management
Using a demo account can help traders understand the importance of account size management by implementing various trade limits and experiencing the effects this can have.
Account size management is a form of risk management, or trying to avoid suffering a crippling effect to your account, otherwise known as ‘blowing out’ your account. For example:
Suppose a trader has $1,000 in his trading account and decides to use a trade size which will take $200 of this money as margin for a trade. If the trade is lost, the $200 is lost and the account will be down 20%. Two more losses of similar magnitude will reduce the account by a further 40%. The trader will now have to make a gain of 150% just to get the account back to the starting level of $1000.
In contrast, a trader who uses a trade size which only commits $50 into a trade, and loses three trades of equal magnitude just like the first trader, would have lost only $150. The 2nd trader would only need a 17.6% profit to bounce back to the starting level.
Account size management can often be the key to staying afloat during market adversity, and finding the right demo account can help you learn the right account size management skills.
Why Choose ThinkMarkets For Demo Accounts?
ThinkMarkets scored best in our review of the top brokers for demo accounts, which takes into account 120+ factors across eight categories. Here are some areas where ThinkMarkets scored highly in:
8+ years in business
Offers 50+ instruments
A range of platform inc. MT4, Mac, Web Trader, Tablet & Mobile apps
24/7 customer service
Tight spreads from 0.10pips
Used by 0+ traders.
Offers demo account
2 languages
ThinkMarkets offers two ways to tradeForex, CFDs.
If you wanted to trade EURUSD
The two most important categories in our rating system are the cost of trading and the
broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.
ThinkMarkets have a B
trust score, which is good. This is largely down to them being regulated by Financial Conduct Authority and ASIC, segregating client funds, being
segregating client funds, being established for over 8
Want to see how ThinkMarkets? We’ve compared their spreads, features, and key information below.
Spread & fee comparsion
The spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
Forex Trading is the execution of transactions in the international foreign exchange market by exchanging one currency for another. The forex market is the largest decentralised unregulated capital market in the world, with an estimated turnover of £3-5 trillion per trading day. Major participants in the forex market include central banks, large financial institutions, hedge funds, large commercial banks, major transnational corporations, high net-worth individuals and retail traders. Once the exclusive domain of large financial institutions, the forex market now includes many smaller speculators who engage in trading online through dedicated forex brokers.
What is a Demo Account?
A demo account is essentially an online trading practice account. In the past this was done by keeping a paper trail of hypothetical trades, which is where the term “Paper trading” comes from. With the proliferation of online trading, paper trading has become as easy as opening up a free demo or virtual account and simulating trades with virtual funds. Many reputable brokers now offer a free demo account, which and can be a quick and easy way of testing a broker to see if their platform is suitable for your trading needs.
Can I Open a Demo Account in MT4?
Yes, Demo accounts are available to be installed onto the MetaTrader 4 (MT4) trading platform.
In addition, copy trading and Expert Advisors (EAs) are also available for demo accounts, following any necessary purchase from the MetaTrader Market. Demo accounts can be opened in the MT4 desktop platform, as well as the available MT4 mobile applications.
What is paper trading?
In the past this was done by keeping a paper trail of hypothetical trades, this is where the term “Paper trading” comes from. Paper trading refers to the practice of trading in a simulated environment without risking actual money.
