To appeal for the attendance of new traders, brokers provide charming programs such as welcome bonuses or trading contests. Demo account is another example. However, demo accounts are more than an invitation. They illustrate the forex environment for beginners to trade with no risk.
The best demo accounts are usually introduced by the largest and the most reliable brokers in the market. The top list is as below:
- Exness accounts
- Hotforex accounts
- XM accounts
- FXTM accounts
In the topic today, we will study about features of demo accounts and answer the questions if should traders invest time on demo accounts and how to do in the best way.
- Features and classification
There are two types of demo accounts at the moment: ECN and standard demo accounts. Needless to say, standard demo accounts (by Market maker and STP brokers) provide you an example of the trading environment in certain features such as:
- Standard lot size
- Standard spread
- Standard leverage
- Standard transaction costs
Because of those, I strongly recommend standards account for any beginners who want to spend time on learning fundamental skills about forex.
Besides, we have ECN accounts. Which are supposed to demo for ECN real accounts, but they seem not to.
ECN accounts are vastly different from the real ECN accounts. Volatility and slippages are happening all the time, plus unsustainable terms. Most forex traders’ feedback is that trading by ECN real accounts is much more difficult than practicing in demo ECN accounts. Therefore, I suggest new traders not to spend much time with ECN.
Using demo ECN account for the first transaction in forex can cause following results, which most of us, in my opinion, do not want to face:
– Unstable terms and incredibly easy trading conditions make traders mistake about the real trading environment and go confused when they move from demo to actual trading.
– Winning several times with such conditions of ECN demo accounts causes traders over-confident. The attitude can cause massive loss if they decide to invest hugely in real accounts.
Because of the above features and causes of ECN accounts, I hope traders did not fall for unrealistic conditions drawn by ECN.
Demo accounts are to experience and learn basic forex lessons. Therefore, you should trade in the most realistic conditions, not the easiest one.
- Differences from real accounts
No matter how correctly demo accounts are programmed, there are some features not similar to real accounts and differences result in incompletion of learning.
I would like to discuss and explain those differences, and new traders, especially beginners have a closer look about the best demo account brokers:
– The purpose: It’s the most apparent point we can see. Demo accounts are created fake and unreal. New traders give a broker a try by using the demo account, and they learn about the basics of forex. Real accounts, of course, are real in transactions, conditions, and loss. Real trading happens with real accounts and only people, who know about the brokers and get ready to lose money take real accounts.
– Traders have to trade with careful calculation and strategies with real accounts but not with demo accounts.
– The conditions: Demo accounts contain ideal conditions by brokers. There are no risk and loss to traders if they trade by demo accounts. Unlike real trading, they invest, and they decline the real money. The same thing happens if they win.
Quotes and figure in demo accounts are not authentic, either. Brokers made up numbers to build up the trading environment. Those number can change all the time. Meanwhile, with real accounts, traders trade in more stable and principled environment.
– Demo accounts are for new traders who never trade with the brokers for beginners who want to learn about forex. That’s why demo accounts are usually clear and straightforward. Only experienced traders use real accounts to trade because they are good enough to manage investment and foretell risk.
*However, to learn about the forex market and practice trading, beginners have got other choices such as Cent or Micro accounts. They have to deposit a little amount of money on using Cent / Micro accounts, but it’s worth investment for real competitions and conditions.
- Valid time
Besides Demo accounts, we have Cent/ Micro accounts to study. And my next problems to discuss is how long you can go with a demo account?
My answer is several days and no more. In fact, what you can learn from the demo accounts is the procedure of trading and learning of loss and gain. However, to know about the steps of trading, doing several transactions is enough.
Cent and Micro accounts can teach you the lessons about loss better, and after several days with demo accounts, you can start with Cent/Micro accounts in case you’re not confident enough with standard reports.
The best forex brokers usually offer 2 to 3 months practicing with Cent/ Micro accounts with the deposit of $10. With such a low investment, the lot value comes in only $0.1 or even $0.0001. You invest much less, earn and lose much less.
- So why do people invest time in demo accounts?
There are demo trading contests published for users with demo accounts, and the prize is a blessing. No one could turn down the invitation, for me, it’s worth trying somehow but not too many times. Demo accounts are entirely costless and riskless. Beginners can feel totally safe in trading using demo accounts. But they soon should step out of the secure zone if they want to earn big.