Demo trading is an important part of your career as a successful trader. It’s a simple concept: you trade in real time with the software platform that your site of choice uses, and you do it with zero risk since you are not using your cash. It’s practice, and when you practice correctly, you will become a better trader.
Correct practice is the keyword here. There’s an old saying that says, “practice makes perfect,” but this isn’t necessarily true. Practice makes permanent, and only perfect practice makes perfect. If you are in a zero risk situation, the practice becomes that much easier to achieve. Other than actual trading, demo trading is the closest that you can get to the real thing without the actual use of your own money.
Demo trading is sometimes called paper trading because that’s how it used to be done. If you wanted this kind of real time practice, you would have to write down everything you were doing on a piece of paper, and then evaluate it later on. You don’t need to do this anymore, though, thanks to technology. Demo trading is a simple little tweak of the site’s software, and it’s already in place for them. The only difference is that instead of using real money, you are using fake money. After all, money is how you keep score in the financial world, so it creates a common and understandable theme.
You can demo trade with Forex brokers and binary options brokers with ease. The difference is that Forex brokers will typically set you up with a demo account without a deposit, while binary brokers require you to make a minimum deposit before you begin. You never need to use your deposit if you end up not liking the platform or the site that you are using on your binary account, but from the site’s perspective, it shows a commitment on your part if you do this and it also makes you more likely to spend that money on their trades, too. In this sense, if you don’t want to make a deposit, Forex trading is the way to go.
Maybe you’re a pro trader, and don’t think that demo trading is worth your time. This is not a good mindset because you are missing out on opportunities. What if you have a new currency pair that you want to practice with, and you’re not really sure if there are differences in its behavior in comparison to other currency pairs? If you jump right in and start trading right away, there is a chance that you could lose money until you get set up with a workable strategy. Even if you don’t lose money when you pick up this new asset, you are extremely likely to not make as much money as you could have, and this will lead to you losing out on money making chances in the meantime. Either way, by taking your time and practicing, you are giving yourself an edge.
The same goes with switching to a new broker. You will not know the software as well, and there’s a chance that you could make a silly mistake by clicking on the wrong button or not being able to find the right screen right away. It’s a little mistake, but it’s actually a common one at a new broker, and demo trading will help you to avoid this without problem just because you will be more familiar with the site’s layout.
Trading with your own cash is going to be different, of course. It is a different psychological frame of mind, and that will take a bit to adjust to. Instead of acting on a theoretical level, you are now really doing it, and when you make a mistake, that is something that you will literally have to pay for. The best approach is to have as much theoretical knowledge as possible before you begin trading with larger amounts of money, regardless of the type of trading that you are actually doing.