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Are Demo Accounts Just for Trading Beginners?

Demo trading accounts are frequently used by newcomers who are looking to gain confidence in currency or stock trading without putting any real cash on the line.

Posted: 20th November 2020 by Finance Monthly
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However, are there also cases in which these practice accounts would be used by more experienced traders, and if so what are they?

The Features That They Offer

To understand why people of different experience levels use demo trading accounts, we need to first of all take a look at what features they include. Generally, they will offer a full range of functionality, allowing users to carry out similar trades to those which they would make with real money.

Some trading services offer a fully functional demo platform that can be accessed on desktop or mobile devices. Support and education is also provided to users, including a selection of webinar sessions.

Through demo trading accounts, users can trade products based on stock indices, commodities, forex, and economic event markets. They can carry out the full transaction from start to finish, letting them see how much money they likely would have made or lost on a comparable real transaction.

A Way to Try Out New Strategies

For an experienced trader, perhaps the biggest reason for using a demo account is to try out new strategies. For instance, it could be used to attempt an advanced scalping forex approach, or to use triangular arbitrage techniques.

Most traders will have one or more strategies that they feel completely comfortable with. Yet, in different economic situations it may be necessary to turn to new strategies that they have never used before.

By doing so with a demo account, the risk of any financial loss if it goes wrong is removed. Any mistakes that the trader makes on the new strategy adds to their learning experience without causing any negative effects.


The Option of Looking at Different Markets

It may also be the case that a trader is experienced in one market but would like to diversify into another. One example is that they may be a forex expert but decide that they want to try and make money from stock market trading too.

This could happen because they feel that the market they currently focus on doesn't offer good investment opportunities right now. It could also be the case that they want to test themselves or just explore new ways of using their skills to potentially make more money. There are advantages and disadvantages to both stock market and forex trading to be considered.

In this situation, their existing knowledge will be useful, but there will be gaps in their expertise that need to be filled in. This could be in terms of learning new strategies or in discovering the tools that give them most value in their new type of trading.

Every Trader Can Use a Demo Account from Time to Time

An experienced trader might go through long spells in which they don't have much need for a demo account. Yet, they are also likely to find that it is something that comes in handy at certain times.

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